The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Find Your Ideal Entry Point
06/10/2011 4:00 pm EST
Anne-Marie Baiynd suggests that traders always look at multiple time frames in order to determine and confirm an effective entry point. She also discusses how to determine which time frames are best for each trader’s distinct approach.
My guest today is Anne-Marie Baiynd. Hi Anne-Marie….I want to know if you have any suggestions on efficient entry and exit spots for traders?
That’s a very good question, and it’s a little bit convoluted to answer, but I’ll start with the simplest thing.
The best thing that a trader can learn to do is look at the same chart in different time frames, and when you look at a time frame that’s longer—say, a daily—you’ll get a general outlook of whether the stock is trending up, down, or sideways.
If you see a moving average, and it’s just below, you know that everybody is feeling pretty happy because they’re buying on the top of the moving average, but if you say “Hey listen, I want to get into that,” the hardest thing a daytrader or a short-term swing trader can do is wait.
They can’t sit on their hands for anything at all. They’re all “Well, I’ve got to get in now; it’s going to run away from me.”
If you have patience, what you’ll notice is a stock will cycle just like the tides going in and out. The waves…if the tide is coming in, the waves that pull back are not as strong as the waves that come in, and vice versa.
So when you’re looking at a stock and it is trending, you want to wait until that big burst has a tiny little pullback, and that pullback will come into your moving averages a lot, but what will really help you in efficiency is by moving to a shorter time frame—say, a 30-minute time frame, or a two-hour time frame, or something else—because the chart becomes more granular and you can see, “Oh, it is coming in there so I can wait.”
Efficient entries, you really don’t have to hardly worry about your exits just so long as your entries are efficient and you make them as close to support as they can possibly be.
Many of us chase stocks because we think momentum is going all away but even though it has support down there somewhere, it’s well beyond the pain we’re willing to risk falling back into that average, so being efficient means being patient, understanding the trend that the stock is moving in and waiting for it to pull back into those areas of support; or resistance if you’re shorting.
How do I find the time frame that is best for me?
Also an excellent question. If you’re a person who deliberates a lot, you don’t want to run the one-minute (time frame). No time for that, right?
So, choosing the best time frame has a lot to do with your personality type. If you find yourself to be extremely impatient, you’ll want to look at a smaller time frame because it will come into your support or into your resistance much more quickly, as opposed to looking at a 30-minute or a two-hour time frame.
If you’re impatient, you’re like “I’m getting in now. I know it’s going to come back a little bit, but I’m just going to wait.” And then you’re going to end up really putting yourself behind the eight ball like that, so you have to take a look at yourself; who are you?
A lot of us who are newer traders or inexperienced traders, we don’t quite know what kinds of things make us tick. We don’t know what Pavlovian things we’ve got going on with this that make us click the mouse, and so we have to understand ourselves.
So take a minute and think, “Am I patient?” “Do I over-deliberate, or do I deliberate a lot?” The more you deliberate, the longer your time frame needs to be.
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