Continue reading...Of all the facets of trading, the first that a new trader must learn before he can engage the markets with any degree of confidence is the identification of low risk entries on a price chart. Notice that not just any entry will do, only those offering the biggest reward for the least amount of loss potential.
If you’ve ever read about or had the chance to chat with any successful trader, you will find one common thread: They all (without exception) have an edge based on low risk entries.
What defines a low risk entry? I define it as the following: The price level where a trader can expose the least amount of capital to prove whether his edge will work. I tell students to look for these areas by identifying "the line in the sand" or "drop-dead level" where price has to hold. These are generally found at prior inflection points on the chart.
Specifically, inflection points can be spotted by looking for those price levels where there was a clear change of direction. In other words...
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