Entry Strategy

[It's Snake Pliskin]

Nizar, does this thread say that?

I thought we were talking about entry strategies??????

Quite honestly i'm interested in what others like to use as entry's!

I don't care if they're profitable or not, (at this stage) that we know we can determine through testing with exits, money mgt. etc.....later on...

Ron1n started a thread for entry's...why can't we just discuss them without getting wound up in the great debate about wheather or not they're the most important part of trading?

Anyone here understand my point?

Cheers,

Can,

I agree for what it's worth.
the guy wants simple discussion on entries.

 

[It's Snake Pliskin]

Know your risk.
Get the best entry for it.
Get the best exit for it.

An understanding of the art is essential and involves a lot of hard work to master.
Discretionary works.
Mechanical works.

Dispense with biases that put your risk at risk of failure.

Entries - love them. :1luvu:
To say entries don't matter is naieve and delusional incompetence.
In isolation an entry is a tactic, a part of the whole and the other parts are nothing without it - the strategy.

 

[tech/a]

Oh yes I am working on my system... and hence so many queries...

See this is what pisses me off. My discussion has been based around 8 yrs of systems developement,I can see where this guy is going and infact where all of you are making blundering errors.

Yet when quality information hits you between the eyes,this lame blah blah any entry given the right conditions rubbish gets taken for gospel.

Goodluck with your systems developement could have saved you a few years but as I said--Wasting my time.

Now I'll bugger off from this thread.

 

[wayneL]

See this is what pisses me off. My discussion has been based around 8 yrs of systems developement,I can see where this guy is going and infact where all of you are making blundering errors.

Yet when quality information hits you between the eyes,this lame blah blah any entry given the right conditions rubbish gets taken for gospel.

Goodluck with your systems developement could have saved you a few years but as I said--Wasting my time.

Now I'll bugger off from this thread.

Yeah, everyone is a %$#&wit except Tech/A.

 

[Lachlan6]

Just read Van Tharpe. Will put it all together. I know on face value the entry seems logically very important and in some ways it is, systems management (in other words not losing to much of your capital) is the basis from which traders become successful. I think the longer you trade the more you realize this.

 

[CanOz]

See this is what pisses me off.[/B] My discussion has been based around 8 yrs of systems developement,I can see where this guy is going and infact where all of you are making blundering errors.

Frankly, i'm very interested in hearing your views on this Tech, can we do it in another thread? How about System Development, i'd also be keen to hear how you intend on working your way through your new system, step by step, that would be a great learning tool for us.

Yet when quality information hits you between the eyes,this lame blah blah any entry given the right conditions rubbish gets taken for gospel.

Again, with all due respect, its sometimes the force in which it hits us between the eyes that raises a few hackles.

Goodluck with your systems developement could have saved you a few years but as I said--Wasting my time.

There are many of us here who would greatly appreciate any and all help in regards to system development, by understanding the other intricate components we can realise how little the entry actually means.

Cheers,

 

[RichKid]

Hi Rich

I say I can 100% control the entry
but less the risk

I can set a stop
but the mkt can gap down
the stock can be suspended

So I can set the stop position 100%

but does not mean it will be filled

also I would use a logical stop position that
negated the action I had defined
rather than an arbitrary %

So that is why the entry is important
the stop has logical positions ( with wiggle room )

It is possible to have the stop very close to the entry.

Buying CTX on the reaction will mean a tighter stop is possible than
buying on the breakout maybe depending at the time on the setup that presents..

motorway

hi Mw!
yes I agree, that's why having small position sizes at the outset is important, anything can happen in the market...my language was loose about the stop- I don't use an arbitrary stop % as I'm a technical trader- it has to correspond to a strong logical stop (eg EW invalidation point or a pattern failure point or below a pivot level), I adjust the position size to suit the max amount 'risked'. Sometimes you can cover several invalidation points with one stop- so when you're wrong you're wrong on several points and you know it and there are no regrets. btw, I work out my ideal stop point first and then look for an entry level, my guess is that many people would do this.

Nice analysis with CTX, certainly is showing strength.

btw, there are a number of threads on system testing and development on ASF, with many contributions by tech and other mechanical systems traders.

 

[rowes]

Hi,

Heres some of the things i use to determine an entry, some of you may agree some may not.

I watch for candlestick reversal patterns coupled with stochastics.
I double check the chart i'm viewing which defaults at 6mnths (this just suits me and my timeframe) - but I also check the chart over alonger period to make sure i am not missing anything in terms of trends, support and resistance.
I take previous support and resistance into account.
I take into account the major moving averages like 50,100,250 SMA as these can quite often become targets for support and resistance.
I listen to the finance report in the morninig news, reason being alot of other people do so when the US has a crap day quite often we do to, this could change my mind on weather to take that position on that day or not.
I take into account the last few days trading, whats does the volume tell me?
I also take into account MY last fews days, if i have been busy with work and my kids have been driving me crazy then i'll wait untill i am sure i'm ready

I like to keep things pretty simple.
there are some other things i also take into account but these are some of the main things i do when selecting my entry.

cheers

 

[Chorlton]

I've seen many discussions just like this. As will most who have been involved in trading for a while.

Like all most traders start to discuss Entry/Exit/Money Management/Risk and stop loss when they are either disillusioned with returns or have copped a fair loss. Those that are profitable dont care until it happens to them. Sometimes years down the track.

Most look at the tools that make up a methodology,the components,few look at the application of all the components together---which is what they will do in their well thought out plan.

Then they will go out and trade that plan without knowing how the combination of well intended componentry actually perform over the years.
Worse they have no idea when its likely to fail and it may well fail from day 1.
They could also be trading brilliantly for a few years and not know wether the drawdown they are in should be ridden out or capitulated!
Many GOOD methods get ditched through FEAR.
Frustration abounds as the best placed entries/exits/stops and Money management STILL fail to give a consistent return.


Solution REGARDLESS of the NUTS and BOLTS of a method/the plan,you must know if the plan is long term profitable,and what its performance numbers are.

To do anything different is time wasting and fruitless.
Those that have been or are on that path will totally understand.

So if your serious you'll have to invest in good testing software and the many hours to become proficient in design and testing systems.

Read Adaptive Analysis Pages 1-50 all will become clear/er.

Hi Tech/A,

IMO, "Exits" are probably more important (together with the use of good Money Management) than "Entries" when it comes to developing & using a reliable trading strategy. Interestingly, I have also read in a couple of books (by different authors) that random based signals can offer similar odds to that of a specific entry signal.

However, surely Money Management (as well as Position Sizing, etc) should also include focusing on those trades which offer the best Reward:Risk ratio's? If this is the case, then Entries have to be an integral part of this. Afterall, isn't one of the important aspects of a system, to focus on "low-risk" set-ups?

Also, you mentioned the importance of "knowing" ones own system with regard to drawdowns, performance, etc. This obvious makes perfect sense, but can I ask how you would personally confirm this? If you rely on backtesting, then don't you run the risk of "curve-fitting" the system to previous data??

Just interested in your thoughts....\

Kind regards,

Chorlton

 

[It's Snake Pliskin]

hijacked!

 

[motorway]

I have also read in a couple of books (by different authors) that random based signals can offer similar odds to that of a specific entry signal.

I have noted the comments of Buffet
regarding the efficient Market Hypothesis

That says random entry is as good as it gets..
because all analysis is valueless...

And any price is the best price..

Buffet sees such a belief producing huge opportunities

For those that can discern real value...



Ok .. I see something similar here...As regard technical signals
If everyone believes the entry is unimportant or a consideration that can make little difference.. How much opportunity for those who can discern ?

what is an entry ?

To Me it is not moving averages, MACDs , RSI , higher highs
even Elliot waves ?

Do you think the Buffets and the Soros's etc etc
Skilled operators of all sizes use such "entries" ..........If they do , They only use them to identify where they should be fading the crowd..

But where ever their entry is ( or is not ) will show up on the tape
and will be where We see demand absorbing supply and overcoming it


There is appearance
and there is character..

If you had to find a scientist from a group of strangers
and you only could use aspects of appearance

Short hair / long hair
wears glasses
introverted
wears a suit
untidy appearance

You would need to back test all those entry points
and maybe decide that a random selection would be as good.
Keep picking and discarding ( stop loss ) until you find one..


However if you talk to that scientist observe Him
and know what the characteristics of a Scientist are.
How one behaves... You just wait to you find one and then you select one..

The working of demand and supply
has been back tested since the dawn of civilization

It works

When those who know more than You start buying , With conviction..

That is Your ( Well My ) entry

regardless of what any technical signal might be saying
They will at best follow along
at worst mislead you

up and down are unimportant

Is there accumulation or distribution
That is important
demand overcoming supply
Even done under cover
Will move prices UP

Extensive accumulation will move prices up a lot
trends will emerge and gather followings

The earlier We ( I ) identify accumulation and distribution
The lower the risk the greater the rewards

The random entry is better, is the EMH of trading..
For the equivalent of the Buffets in the trading world it should produce marvelous opportunities..

Money management is very important
It is Part of the entry
initial position size
Pyramiding
Exits

If identifying accumulation is the basis of the entry
Identifying distribution is the basis of the exit

demand and supply

operates on all time frames
and developing the skills to judge character

Is what I think will make the difference..



motorway

 

[ducati916]

In relation to purely technical entries you can consider the following.

I got a call from a friend of mine who trades at Goldman. Anyway, he started telling me all the things he does in order to place trades and there was a common theme.

Figure out where the market is going and trade with the market. When you do this, your margin of error will grow a lot wider and your losses a lot smaller.

He said that the basic formula is; stocks move sectors, sectors move markets and markets make you rich or poor.

He then proceeded to tell me to watch the stocks in the important sectors (currently energy and financials). If for example you see energy turn up and then you see financials turn positive, then you know that the other sectors will follow or move up from their bottom. The reverse will be true for a down market.

jog on
d998

 

[motorway]

In relation to purely technical entries you can consider the following.

I got a call from a friend of mine who trades at Goldman. Anyway, he started telling me all the things he does in order to place trades and there was a common theme.

Figure out where the market is going and trade with the market. When you do this, your margin of error will grow a lot wider and your losses a lot smaller.

He said that the basic formula is; stocks move sectors, sectors move markets and markets make you rich or poor.

He then proceeded to tell me to watch the stocks in the important sectors (currently energy and financials). If for example you see energy turn up and then you see financials turn positive, then you know that the other sectors will follow or move up from their bottom. The reverse will be true for a down market.

jog on
d998

But where ever their entry is ( or is not ) will show up on the tape
and will be where We see demand absorbing supply and overcoming it

We will see the flow of funds showing up in the changes in the relative performance of stocks sectors and mkts...

" market trends are sustained by a process of rotation"

Before a sector or a stock starts going up
It stops going down..

When did energy stocks start going up ?
When they stopped going down relative to other stocks and sectors ?


A good post duc.

It points to an important areas of analysis..
And also the top down Vs the bottom up analysis
Use both .

In such information are entry and exit pointers


motorway

 

[Kauri]

For mine a random entry in no way measures up againt a planned entry.
For a truly random entry put the share page of your paper in a Budgie cage... the first share "hit" is the one to trade...
Write long...short on paper and put that in there... let the budgie decide trade direction....
Enter and manage that trade....
Do it 100 times... compare the results to your planned entry trades...
After all... most of the random entry dialouges I have read assume they are trading in the direction of the market... why???
Take my only long term holding.. IVC.. pick a random entry anywhere in the past and trade it short... best of luck..

Buffet as I understand it does care about entries... he does the numbers on prospective co's and finds what he calculates to be undervalued ones with good/exceptional growth potential.
If he identifies one at $5 that he believes should be $15 he will possibly buy in, if it is at $12 he probably wont. The exact entry price he is not concerned about, the general price he is.

I believe everyone uses entries, whether they realise it or not..
the fundamentalist works out a value at which he thinks he can buy at or below real value... as opposed to buying at overvalue..
techies use MA's.. RSI's... Stochs... Comp RSI.. patterns...P+F...waves...candles...vol...etc.
I happen to use E/W to define the trend and identify (to me) low risk entry points... and back it up with shape, range and vol characteristics of the price bars... (I have unashamedly stolen this from Nick Radge and incorporated the theory into my trading ). Seems to work for me, probably wouldn't for someone else..
Have suspended my trading on 24Hr spot FX etc while I try to find a confirming method to back up my E/W as the vol seems pretty irrelevant.. the market is spread worldwide and getting accurate vol is impossible.. also it seems to be counted in trades.. a vol of 2 might be 1 trade of $100,000 and 1 trade of $1,000,000...

 

[rowes]

When it comes to entry do what works for you.

There are different styles and methods for different goals.
Buffets entry criteria doesnt help me if i am short term swing trading, random entry is not going to give me my edge either, i am sure my usal indicators wouldnt really matter and random would be fine if i was holding for 10 years.

not much good fishing for kingfish with a rig setup to catch baramundi

 

[motorway]

When it comes to entry do what works for you.

There are different styles and methods for different goals.
Buffets entry criteria doesnt help me if i am short term swing trading, random entry is not going to give me my edge either, i am sure my usal indicators wouldnt really matter and random would be fine if i was holding for 10 years.

not much good fishing for kingfish with a rig setup to catch baramundi

It depends what you are measuring

I have a good article on this point

The longer the time frame ( 10 20 40 years )
Returns converge to the average

Think of a funnel narrowing as time passes

However what converges are returns measured has a % per annum

From this perspective entry is unimportant..

But even Buffet says that it is price paid that determines your return
and makes the difference..

The amount of $$ you have at the end of the time period
is like a funnel with it's open end expanding as time passes
returns measured as $$ diverge depending on the amount of trend captured
( better entry, better exit )

what looks like a small edge in % terms when stated has a % per annum

When compounded over time will mean many many more Dollars held

When investing the price paid determines the return ( and is again where you have 100% control ) ( Buffet puts it as waiting for the perfect pitch )

With trading entries matter, because a small edge is what makes the difference.
At the end of the day better entries and exits will make all those extra dollars..

motorway

 

[motorway]

Ok back to CTX

The bar chart lays out the character of action

We have some higher volume bars that don't making much progress.

So sellers are meeting buyers

sellers are meeting buyers because the price has moved up to find them..

What is happening ?

The price has moved up already ( was there already good buy setups ? )

The current bars ? There are closes at the lows and some near the highs

So Buying is absorbing the supply
or there is distribution happening

what can make it clearer ?

What ever way you can do it
You have to look at comparative relative strength

here the P&F C. RS chart Vs the XJO

shows strength

I would with the available information
Say that buyers are absorbing the supply

I would be looking for an entry
on a breakout from strength from this zone of "absorption"

( Well what do you think will happen when available supply at the price is absorbed ? )

Or if there is weakness .. dependant on the Price Vol characteristics
I would go long at the 50% retrace

( remember trends are higher highs and higher lows, A higher low is a very good entry point )

I am leaving aside the placement of stop
or other considerations..

Buy in the absorption area ?
The two scenarios will confirm the character of the action I have posited.
atm I do not have confirmation

supply can confirm a long position
by the character of the action as price reacts back..
Demand can confirm by breaking out

A breakout from an area of absorption
is a valid breakout less likely to be a trap..

The bars also have rising lows ( except the last one )
They overlap ease of movement is not evident
one side taking out the other..

But look at the relative strength


I would judge the lower risk entry is on the reaction back
as a small selling wave is absorbed and dissipated

esp if the relative strength stays strong..



motorway

What makes forum works are constructive discussions
where people make an effort to take things forward...

CTX was put forward as an example

So here is an updated chart
above I said ahead of time what I would need for entry

Has not happened just yet
Came back to the 50% retrace
but with a wide spread abrupt bar

not the narrow spread exhaustion bar I was seeking

close was off the bottom

Mkt was giving a context of background weakness

So it is unfolding OK

Vol is subsiding

the small down wave I was looking for
is reacting back and dissipating

The amount of spread in the bar however qualifies that

I need to keep watching the relative strength
and the overall market
as well as the CTX action itself

As it is turning out a buy in the absorption area was not optimal as I surmised


On the point of discretionary, mechanical and systematic.

This chart is drawn in a systematic non-discretionary manner
the 50% retrace line is where it has to be
The trend lines could not be drawn anywhere else.
( they have to be valid )

However the buy signal can occur on any bar
and hence evades coarse mechanical definition

It is about the character of the action
not the appearance the what of the action

The volume at the high
tells us that many where buying on false signals
A failed breakout....

lets see what unfolds
If we can buy a tick from the bottom
So much the better..



motorway

 

[Edwood]

here's a practical example for short term entries Ronin - Dax tonight. straight away it was under the 1day MA (560min on a 1min chart). breaking down with lower lows, so short entries only

however very strong +ve divergence started showing so you know a long is coming. safest place to enter is probably on the 1day MA cross & from there plenty of long entry signals above the 1day with higher highs & lows & you can keep moving your stop up.

I longed around 7,690 but closed for a small loss when I went to bed - can't sit up all night every night! for me the set up presented, I went in before the 1day because I was looking for a scalp - in this case it turned into a nice swing but of course you don;t know that in advance!

there are loads of potential entry signals around - you just have to find some that work for your overall style

all the best

Ed

 

[R0n1n]

thanx a lot Motorway and Edwood. Its nice to see the thinking behind the entry parameter. Motorway your trendline work is great.

 

[Edwood]

no worries

yep trend is key Ronin - as someone said the other day you don't get far trying to swim up a river