Subscribe
Apple | Google | Spotify | Stitcher | Soundcloud | YouTube
In this episode, you’ll discover 5 powerful tips to improve your trading entries.
So listen to it now…
Resources
Trend Following Trading Strategy Guide
How to Set Stop Loss to Protect Your Profits and Ride Big Trends
The Complete Guide to Breakout Trading
Transcript
Hey, hey, what’s up my friend?
Today, I want to share with you 5 tips that will improve your trading entries.
This will be useful for you if you’re a trader who always enters your trades too early, and ends up getting stopped out. Or you enter your trades too late only for the market to reverse, and you end up getting stopped out as well.
If you’re trying to fine-tune your entries, then today’s episode will help you with it.
So let’s get started.
Trading entry tip #1: Trade with the trend
When I talk about trading with the trend, it has to be on a relevant timeframe. If your entry timeframe is the 5-minute timeframe, then clearly it doesn’t matter what the weekly or the monthly timeframe trend is, because it’s irrelevant to you.
You want to be trading with the trend on a relevant timeframe. Let’s say you’re trading on a daily timeframe, then you want to be paying attention to the weekly timeframe’s trend.
What you can do is to use a factor of 4 to 6. For example, on a daily timeframe and a weekly timeframe, that is a factor of 5. Because 5 days equal to a week. Make sense?
And let’s say you’re entering 5-minute timeframe, then with a factor of 6, your higher timeframe is the 30-minute timeframe. The way to define the higher timeframe trend is to use anywhere between a factor of 4 to 6.
So that’s the first tip – to trade with the trend by referring to a relevant timeframe.
Trading entry tip #2: Trade from an area of value (and not far away from it)
Let’s say the market is in a nice healthy trend, making a series of higher highs and higher lows. And when you overlay the 100-day moving average over it, you notice the market bounce off the 100-day MA quite a few times.
Now when you look at the chart, the price is very far away from the 100-day moving average. So even though the market is currently in an uptrend, you don’t want to be buying now because this market tends to pull back to the 100-day moving average.
If you’re buying when the price is very far away from the 100-day moving average, when the price is overstretched, there’s a good chance the market could reverse or do a pullback and you’ll get stopped out.
So this is what I mean by trading near an area of value and not far away from it. I use moving averages, but you can also use trendlines, trend channels, etc.
If you look at a chart and the market has already made an explosive breakout or went parabolic, chances are it’s not near an area of value.
Moving on…
Trading entry tip #3: Wait for a price rejection signal before you enter a trade
Let’s say you want to buy at support. The thing is this, you have no idea whether support is going to hold or not. The price might just slice through it and break support, you’ll never know.
This is where you need some sort of confirmation to tell you that the market is holding and there’s a good chance it could bounce up higher.
A price rejection signal could be something as simple as a strong bullish close at support like a bullish engulfing pattern or a hammer. The stronger the close, the greater the price rejection, the more bullish it is.
This is a confirmation signal from the market to tell you that buyers are stepping in to push the price higher. So that’s one way you can better time your entries.
Trading entry tip #4: Trade the break of structure on the lower timeframe
Let’s say the price rejection I’ve talked about earlier is on a daily timeframe and you’re trading on the daily timeframe. But what if the price comes to support on the daily timeframe and you didn’t get a price rejection signal? What now?
Don’t worry, not all is lost because you can drill down to the lower timeframe like the 4-hour timeframe and look for a break of structure.
When the price comes into support on the daily timeframe, the price is likely making a series of lower highs and lower lows on the 4-hour timeframe. That’s why you saw that strong bearish move on a daily timeframe.
What you’re going to do on the 4-hour timeframe is to let the buyers step in and let them signal to you that they’re taking control. And one way to tell is when you see a series of higher highs and higher lows on the lower timeframe.
There are buyers stepping into the market now and could possibly push the price higher. This break of structure tells you that you could enter the market at this point.
So this is what I call the break of structure technique.
And finally…
Trading entry tip #5: Don’t chase the breakout
With regards to breakout trading, many traders are excited to trade breakouts especially when the candles are huge and the momentum is strong. They’ll be thinking, “Rayner, look at the strong bullish momentum, it’s time to buy! Why are you stopping me?”
Here’s the thing, when the market has gone parabolic and the range of the candles has expanded, it’s probably too late to buy. This is where the market is about to make a pullback or reversal.
To better time your entry for breakout trades, you want to see a buildup, which is simply a tight consolidation on the chart. You want to see a tight consolidation at resistance of maybe 10 to 15 candles where the range of the candles is pretty tight.
When you have this tight buildup there, now you want to be buying the breakout and set your stop loss just below the lows of this buildup.
Now you have a much more reasonable size of stop loss. During the forming of a buildup, the volatility of the market is low. One thing for sure is – low volatility markets don’t persist forever.
Eventually, the price needs to make a move and volatility will pick up. When that happens, you’re pretty much in a sweet spot to catch the breakout.
So if you want to trade breakouts, do remember to trade breakouts with buildup.
Want to discover these powerful tips in details?
I know some of these tips that I shared with you would be greatly complemented with price chart illustrations but because this is a podcast and not really a training video, I just want to share with you the broad concepts.
If you want to have a deeper training, just go down to my YouTube channel TradingwithRayner and search for the things that I’ve mentioned like for example “breakout with a buildup”, “price action trading strategies” or “how to time your trading entries”.
You should be able to find my training videos to explain these concepts in greater details.
With that said, I have come to the end of this episode, and I hope you got some value out of it. I’ll talk to you soon.