Best way to position entry

I want to trade 30min, 1hr and 4hr candles and maybe even day candles eventually… I understand japanese candlestick patterns very well, I have recently learnt about stochastics, divergence, support + resistence lines and trend channels.

If i was to start my day by drawing out my support & resistence on say the 30min or 1hr chart.
Then look for hidden divergences where momentum and price action clash.
Then look for candlestick pattern to follow that divergence, ie an engulfing bullish candle or hammer candle at the bottom of a drop… vice versa from the top
and seeing all this on a support line for bottom or resistance line for top, ideally in the oversold/overbought zone…

Would this merit a good entry point for a trade?

Is there anything I can add to this to better my odds or would you say even without an engulfing candle formation, it would be highly probably anyway?

This sounds a rational approach and lots of traders use this sort of filter to identify entries. One problem is it relies on indicators and price’s relationship with them. Indicators are often very misleading and can add a level of uncertainty, rather than strengthening your certainty.

The other issue I have to suggest is exits - we all focus too much on entries but it is exits that make the money. Have you sound rules for exits that are as robust as your rules for entry?

A further problem arising from focusing on good entry set-ups is that perspective s lost, e.g. a perfect entry set-up right before some major geo-political / economic news event, or a fantastic buy signal on a pair based on a currency that is going down in all other pairs.

Thanks Tom!

I’m still working on exit, I’m very hesistent when it comes to approaching resistance and seeing a typical rebound. I think for now I plan to exit any trade that rebounds more than 50% of the rise, or 50% of the drop on a short. That at least gives the trade a chance to try again. My SL is something I’m still working on, I typically made wide SL’s which then threw off my R:R but I’ve cleaned that up a lot lately and tightened it but I expect it will need addressing again with some more tutuorials and experience experience experience.

I know what you mean about major geo-political / economic news events… I intentionally chose not to trade in this style Thursday and Friday last week and also today because we’re still in the aftermath of the elections. Although I am going long on a CHF pair :stuck_out_tongue: haha

I studied this approach a lot last night and you’re right it can bring uncertainty because directly after, say a hidden divergence in the overbought / oversold zones (for example: 10% and 90%)… the market may not necessarily move in my favour right away, it could be as much as 3-4 candles on a 30M chart and that could be after 10pips in opposite direction.

So I love the concept but could you suggest how I could tweak this to my benefit? :slight_smile:

I could only suggest extending the time-frame. I don’t day-trade ever but maybe someone else has a more applicable idea.