Once you have learned the basics of forex and how to read charts and learned about some indicators and how to use them and what they do and represent… what’s next.
I get a lot of people asking me daily what to do, what to trade, should i get in on this trend or that trend… etc.
My advice to people is always the same…First learn the basics of the market and what it represents, then learn to deal with the emotions and psychological effects that come into play, can you cope with loss, what will you do when you lose? etc.
I see it soo often that people will jump into a trend that others are or have been following and normally they end up getting stopped out or taking a mere few points profit.
I urge people that once you’re ready with the basic knowledge and have found and become comfortable with the market and your strategy and set of tools you will be using… Practice your entries. Practice and Practice.
I believe more time should be spent by new traders practicing their entries. Some on here suggest trading without a stop loss… is that really a smart thing to do? If you had better entries your stops would not be hit all the time and not only that but also you will profit more by attaining better pip gains because you got on the trends earlier when they are reversing or taking shape.
Myself i’m down to about a 20-30 pip stop with my entries even using 4hr charts… most trades will have a 20-30pip stop with a 60-150pip TP target. How? because I have spent soo much time focusing on just attaining the best entry point with the tools that I use.
I know there is a lesson in this topic that should benefit everyone… Maybe together we can get something going regarding entries and entry principles.
if your entry is near a support or resistance area than your potential take profit could have much more potential than your stop loss. So picking your entry is important. Also having confidence in your system will help you to let your profits run instead of cutting them to early to “lock in profit”
I also agree about practicing because that is how you will gain confidence. Also I know this thread is about entries but lets not forget exiting is at least as important as entry and money management. I guess it is my opinion that all these components are critical that if any one of them is overlooked it will cause you to fail.
The problem I see with doing that is the a very big psychological battle you may end up putting yourself thru while waiting for the right time to exit. If your entry makes you wait in drawdown for too long a time, then it’s very stressful. That also sounds like you’d have to have no stop or a really big stop to allow price to “eventually” crawl into profit on those occassions where it went into large drawdowns.
I agree that if you do manage to get your entries bettered, then you know fairly quickly if the trade is going to work out or not by having a tighter stop, and if it is going to work out, then your trade management will take care of exiting with profit, or at least break even, at the right time…less stress, more confidence, and ready for the next setup.
Concentrating on entries is an exercise in futility, theyre not remotely important. Anyone who is dumb enough to hold a trade until margin call deserves everyting they get, and for their own benefit, the sooner it happens to them the better.
I’m not saying that you cant find an entry that better than random chance, because you can, but [I]generally[/I] theyre not that much better, and there’s [I]generally[/I] insuficient edge in the entry itself to overcome transaction costs. The significant element of the edge typically comes from trade management and exit.
Well yes lol, I didnt exactly mean to do that, I meant within sensible limits if you have a good exit strategy the entry point can be anywhere before that exit point is reached, I have always found good entry points alot easier to identify than exit points, and many times I have opened good positions and missed the best exit point.
While it certainly gives you a headstart, if you lack money management skills, you’ll get pickpocketed to zero.
If you lack trade management, you’ll break even at best. If you lack a solid exit plan, your great entries can wind up losers.
There’s not one facet of this thing you can deem as “most important”. One has to look at this from a holistic standpoint.
Neglecting any part will lead to discouraging results.
Sorry but from a mathematical point of view, entry is NOT the most important aspect of trading.
There are 4 elements in trading the way I see it, in order of importance
Psychology
Money management
Exit point
Entry Point
A) Let’s knock out entry point and see what might happen to the trader who still functions well in the other 3 aspects.
Psychologically speaking, he is able to call it quits when he feels the trade is not going his way anymore, limiting loses. Furthermore, he managed money well, making his draw down small. With the right exit strategy, he may have been able to pick out many wins before they turn into losers, this aided by psychology.
B) Knock out being good with exit points, the trader might get in well, but will be clueless as to what to do when the money already rolled, should exit now or not? No clue because no ideas about exit strategy. Strong psychology saves the trader from succumbing to greed or fear however and he may still be able to ‘feel’ an exit point and act with discipline to get out. That, and if he loses most of his potential profits he would still be psychologically strong enough to carry the next trade.
C) Knocking out Money Management is probably bad enough to that I should say it IS as important as psychology. Why? Not knowing what you are risking or risking too much is the key to end up succumbing to an increased probability of a drawdown that is irrecoverable.
D) Knocking out psychology, you have pretty much subjected yourself to an eventual knockout of all the rest =P
P.S. This comes from a relative n00b who only demo-ed for 6 months though I have yet to blow the account yet =P, and no, I’m not drawn down. Shows how relatively unimportant picking out good entries are. Just good psychology and good money management goes a long way. Course, when I go live, psychology may not be so easy anymore but that’s story for antoher day lol, I’m longwinded sorry
I’m sure that most of the people who are arging about the importance of entries couldnt even tell you what actually constitutes a good entry, or how they’d measure and monitor it, or exactly how much better their entry was than random.
If they could, they wouldnt actually come out with the nonsense they do, unless they had an adgenda to deliberatiely mislead (and I suspect there are quite a few around here who do :D)
Got to totally agree, 90% of the rubbish floating around out there goes to great lengths to detail their specific entry trigger, and leaves everything else to the last few pages,
It’s like trying to drive a car with no steering wheel and 3 tyres.
However the sellers of this rubbish are doing what all other businesses are doing, giving the people what they want, not what they need.
If I recall correctly I read it in trade your way to financial freedom, where the author details how he was at one if these trading conventions and the stand that had the biggest crowds was the one selling the magic entry, the ones that talk about money management or trading psychology tend to be empty with little or no interest.
Unfortunately trading is something where all of them require some attention leave one out and you have an incomplete system, and if you don’t have the answers when the market asks, you normally loose money.
I THINK what John Carter was TRYING to say (or at least the point that I myself was trying to make) was the fact that it’s no good having GOOD entries and not worrying about where / when you’re going to exit. Believe me: I’ve watched some STIRLING trades (good entries) turn to ‘sh*t’ (because of not having a clearly defined exit point at the beginning of the trade) more times than I care to note here. That was the point I think. Also: an exit point could be defined as an SL OR a TP. It matters not. Just as long you HAVE one!!!
Good entries are helpful, but I agree that most people don’t know how to measure the effectiveness of their entries anyway. I have some simple methods I use to measure my entry efficiency and I seek to improve entries against those measures. Objective measures of entry effectiveness make a huge difference, but so do many other things. In my opinion, if you don’t know how to measure your entries’ effectiveness objectively, you are just wandering in the wilderness looking for that Holy Grail entry method.
Good exits are much more difficult than good entries, for me at least, but I have to give credence to the notion that it’s all important. Maybe some aspects of trading are easier than others, but I don’t think good traders can afford to focus on one aspect of their trades more than others. That’s just my own opinion.
Taking the approach that entries are a part of a whole trading plan - say a chapter amongst many - and as every chapter should be kept up to date and regulary reviewed, I’m always reviewing the entry part of trades and attempting to improve.
Having good methods of assessing entries, as Graviton mentioned, is probably the key here. I’m still stumbling through data and records trying to find a good match. So far I’ve been tracking ATR and also how far trades go against me at the time of entry according to my signals. A good enough portion of my results show that trades which move only a small amount against me often produce good pip values, making this exercise worthwhile. I’m far from getting the right mix but am liking the challenge and the discussion.
