One of the most important things to learn at the beginning of your trading journey is trading entry strategies. In this article, we will cover the essentials so that you will learn the basics of the trade entry method by the end of this guide.
Read on to find out how to better your trading strategies and get one step closer to becoming a pro!
Why Are Trade Entry Strategies Important?
Did you know that the most significant two pitfalls of beginner trader moves are false entries and early trade entries?
If you already dabbled in trading, you know that entering too early can screw up an otherwise good trading strategy. Were you a victim of FOMO (fear of missing out)?
So, it’s likely you lost money because your trading entry strategy was bad, even though you were on the right path.
While exit strategies, risk management, and other aspects are just as important, you won’t get far along if your entry strategy isn’t good. And on a psychological part, we humans crave instant gratification, especially in today’s fast-paced world. So, if you play your entry strategies right, you get off to a motivational start.
Tips for Planning Better Day Trading Entry Strategies
You won’t get far in trading if you don’t master some basics, like the art of being patient. That is just one of the things you have to keep in mind when planning trading entries. But let’s not get too brief and vague, and let’s dive deeper into the nuances of patience, daily chart readings, liquidity, scaling in, planning orders, and the best time to trade.
While we all find it hard to sit around and seemingly do nothing, we need to learn to act with intent and save our buying power for the best moments and setups. Especially when entering trades.
Before you enter the trade, you need to ensure you are entering for the right reason. You don’t want to end up regretting your rushed decision. Think about it this way: it’s not that bad if you miss a trade since there will be more trading chances waiting for you. But if you go into a bad trade, you risk significant losses or lose everything on your whole account.
Referencing Daily Charts
Daily charts help pinpoint necessary support and resistance levels.
If you know how to spot them and comprehend them, you have a good idea of where people will buy and sell. While you don’t have to enter a trade at those exact levels necessarily, you should at least be aware of them. Lots of stock break those levels prior to going back under and over them. That can bring up some great chances for trading.
Adding liquidity is not something to be overlooked, even though many traders will tell you that they strategize around their trades without adding and removing liquidity.
To revise, adding liquidity translates to purchasing on the bid or selling on the ask.
Adding liquidity usually means that the trader has been patient and they let the trade come to them. Then, they decide the price that they want to purchase or sell their shares at, and they place their order. If they get filled, it simply means they have a trade. If they don’t get filled, they sit and wait for the next chance.
Scaling In – Yay or Nay?
Lots of active day traders scale into trades one order at a time. So rather than purchasing a full position in a single order, they are splitting it up across a couple of them. That lets them mitigate risk and possibly bring up the trade’s profit.
Bear in mind that scaling into a trade isn’t simply adding shares at random moments. You need to have a good explanation of why you are doing so.
Time of Trade
Specific periods have specific trading patterns. It would be best if you calculated that when planning trading entry strategies. To be more exact:
- Trading prior to 10 a.m.: At this time, there hasn’t been any formed real trend, so one must rely on the daily chart and pre-marketplace trading activities. Concentrate on getting in and out fast and sound. These periods can be more unstable than others.
- Trading prior to 10 a.m.: The stock starts to form by this point. Now you got more good intraday price points for planning entries. And you can better observe risk, thanks to proven support points and the volume-weighted average price.
Planning orders is essential when a stock is on a roll and has momentum and when you expect a breakout. That is because it can be harder to enter a trade and get the fill that you want.
Planning orders can be done in-market if you place limit orders or out-of-market if you prepare orders, meaning it’s simpler to send them to the marketplace when the time is right.
Don’t risk having your stocks slip away from you. Prepare orders to be ready for different scenarios and trade smart.
3 Best Trading Strategies for Beginners
For anything in life to work, you need a solid foundation. In the case of trading, this foundation is your entry strategy.
To be more exact, a trader should first concentrate on analyzing the market and why it goes up and down. Then they move on to the trade when the time is right because you don’t want to trade on your gut, but rather when the trading conditions tell us so.
Here are the best three trading methods for entering trades:
Trading Entry Strategy 1: OHL Entry
OHL Entry stands for Open High Low Entry. This day trading entry lets you buy and sell stocks in the initial one to five minutes after the trade opening.
The entry rules are:
- Buying entry signals are created when the opening price equals the lowest price. We suggest you buy at the break of the initial first-minute candle high.
- Selling entry signals are created when the opening price equals the highest price. We recommend you sell at the break of the initial first-minute candle low.
Trading Entry Strategy 2: The 3-period RSI Entry Technique
What is the best entry point in this strategy? The best moment to enter the trade is when the daily 3-period Relative Strength Index is lower than twenty.
This kind of entry confirmation can keep you safe from specific damage that comes with entering trades too early. If, on the next day, a buying stop is put above the high of the first hour’s trading range, then you can take this entry signal as a green light for carrying on.
Trading Entry Strategy 3: The 3-Bar Reversal Pattern
Beginners will also appreciate the 3-bar reversal pattern strategy.
How to spot a 3-bar reversal pattern strategy?
- The middle candle is at the lowest level.
- The couple of candles on each side of it have higher lows.
- The third one closes over the first candle’s high
The entry begins at the fourth candle’s open.
Before entering a trade:
- Make sure that the conditions are aligned with your trading method.
- Try to form a signal that tells you that now is the right time to act and enter a trade.
- Don’t forget to set a stop loss and target, and then see if the reward is better than the risk.
- Enter the trade if it does.
Yes, this might seem like a lot to consider just for the initial steps, but once you get into the groove, you will find entering trades a much smoother process that comes more naturally. We put “patience” as the first tip for successful trading entries for a reason – you won’t move from the starting point if you don’t master the art of zen and waiting for the right moment to strike. Read our blog for more trading strategies and tips!