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Now here are a few beliefs traders might have on why they would rather wait for a retracement in price or in a mathematical formula: |
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1. By waiting for a retest of a valid trend line, the trader could use a small stop. The trend line has already demonstrated its power to rally prices in the past. |
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2. By waiting for a percentage retracement, the trader is acknowledging that some market moves will retrace 33, 50, or 66 percent, and by waiting the trader will be going long at a much better price that may allow for a tighter stop. |
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3. By waiting for a retest of a previous resistance or support price level, the trader is acknowledging the significance of how what was resistance for the bulls should now be support, or previous bullish support should remain support, provided that the continuity of thought is still up. Here too, tighter stops may be used. |
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4. By waiting for the retracement, and then for the price or a mathematical formula to behave in a certain manner, the trader can look for a particular pattern that in the past has represented the resumption of the bull move. The stop order can then be placed closer to the entry price. |
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The reason that traders wait for their mathematically based study or program to do something before they enter is that they have been able to identify a pattern through their math or program, allowing them to enter into a trade with the best probability that the trade is going to work. |
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Getting long as soon as the continuity of bearish thought has been broken allows the trader to get into a bull move before the rest of the traders have realized the continuity of thought has been broken. Getting long when the realization that the technical and the fundamentals are in alignment allows the trader to be fairly certain that the bull market will continue. It means that the trader will not be chopped to deaththat is, both the technical and fundamental traders share the belief that the bulls are or will be the dominant force. |
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You need to understand that there is no ideal way to enter the market. There is an ideal way for you to enter the market. Only you can determine what that method is. Whatever method you use to enter into a trade, you must be comfortable with the underlying reason that you are entering in that manner, and you must be able to make it quantifiable. |
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Remember, there is no holy grail. Your responsibility to yourself is to define how you see the market, how you want to enter the market, what has |
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