One of the most essential elements of a trading plan and executing a successful trade is your entry…
If you hear about a ticker and see it’s going straight up, it can be tempting to chase and get a piece of the move…
But when it reverses shortly after your entry, you’re left wondering what to do.
You have too much size and your entry was too far from your risk level.
That can stir up emotions and lead to irrational decisions…
Maybe you cut the trade too soon and miss out on more upside. Or you hold until your risk and end up with a large loss.
In short — bad entries create chaos.
That’s not how you want to trade.
Patience is key when waiting for an entry. But there’s not one right answer in trading…
So today I’ll show you two different ways you can enter trades. See what fits your individual style and what makes sense to you below!
Two Ways to Enter a Trade
Let’s look at a runner from yesterday and break down two potential entry points.
First, my trading style is to buy breakouts above key levels.
It’s another Chinese/Hong Kong IPO with a relatively low float. And it had a nice breakout level on the chart….
The $3.50 breakout level I was eyeing was Friday’s after-hours high.
So the pattern for my trade idea was a dip and rip. Where you enter when the stock breaks above an after hours or premarket resistance level on the chart.
Here’s what it looks like…
Ideally, I’ll look for a 2-to-1 or 3-to-1 risk to reward on my trades.
With this trade idea, there were roughly 50 cents per share to my risk level. So I’d look for $1 or $1.50 per share of upside.
But when a stock double tops, that shows you that’s resistance and you should get out…
And you can’t ignore signs that it’s time to sell when you’re in a trade.
But a SteadyTrade Team member pointed out another potential way to trade GRFX that can get you in a trade earlier…
Same Ticker, Different Trade Idea
You can see for the first 15 minutes, GRFX trended sideways and formed a triangle.
Bryce likes to buy when a stock breaks above the upper trendline. Because when a trend breaks to the upside, in theory, it will continue higher.
And this strategy can give you entries that are closer to your risk level.
Like my trade idea, you’d risk the low of day at $2.98. But you’d enter around $3.15 when the stock broke above the trend line. It was also a reclaim of VWAP…
But one downside of this strategy is the resistance levels overhead…
You can see on the chart you have the regular hours high of the day and the after-hours high from Friday that could act as resistance.
One strategy has wider risk but less overhead resistance. The other gives you an entry closer to your risk, but it could fail at resistance.
That’s why developing a trading strategy is very personal. You have to find what works for you…
Bryce and I are both successful traders. But we have different styles.
You can learn from both of us in the SteadyTrade Team and see what works best for you!
Have a great day everyone. I’ll see you back here tomorrow.
Lead Trainer, StocksToTrade