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The Entry:
Getting in Right |
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What does it take to "get in right"? Find a proven chart pattern, put together a solid, complete trading plan, and execute it. |
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We know about chart patterns, but what do we really mean by a solid, complete trading plan? We mean that you will never again make a tradeany tradewithout having the following things solidly in mind. |
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If you are trading against chart patterns, the reason is a revival buy setup or a wedge sell setup. |
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If you are not trading a chart pattern, the reason had better be just as well-articulated. |
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You also have to use your judgment here. Just because some chart pattern tells you to buy QCOM at 120 doesn't mean that you must take that trade. Ask yourself: |
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Do I believe that the potential reward in this trade justifies the risk? Remember, you are shooting for a minimum reward that is three times your risk. Is that reasonable in this case? |
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Do I like the spread on this stock, or is it so large that I am effectively beyond my ISP when I get in? |
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Is the average trading range wide enough to give you enough upside potential on this trade? Why risk 2 points on a stock that only moves 1 point per day? |
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Is there enough volume in this stock to give you a good chance of getting back out of this trade when you are ready to exit? If you are in for 2,500 shares on a stock that only trades 46,000 shares a day, do you think you can exit quickly at the price you want? |
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Is there the potential for news or any other outside factor to affect this trade negatively? Do you really want to buy GM this morning when the results of their union negotiations are expected to be announced this afternoon? |
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Hey! No kidding here. Some symbols are very close to others. If you mean to buy Microsoft, be sure you type in "MSFT." If you type in "MFST" you might be very unhappy! |
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