Trading in the market has become incredibly popular over the years, and for good reason. If done properly, trading is a great way to earn money in the market quickly, rather than investing and holding onto stocks for months, years, or even decades. However, trading does take some skill, and one of the most important skills to posses is the ability to time your entries. After all, entering into a trade at the wrong time could lead to smaller profits or worse, losses. Today, we’ll talk about 3 different ways to go about identifying trade entries.
However, before we get into how to identify trade entries, it’s important that you know that trading is always a speculative process and there is always risk involved. While you will have more successful trades with a solid strategy for identifying entries, there is no strategy that’s 100% correct. With that said, let’s get into how to identify trade entries.
Trade Entry Strategy #1: Breakout Trading
In the technical trading world, there is always a trend. The trend includes a support point, a resistance point, and a spread. Support is the low side of the trend, resistance is the high side of the trend. A breakout is when the asset trades above resistance or below support. This action generally suggests that the stock is going to make a strong run in the direction of the breakout.
Taking advantage of this strategy is relatively simply. First and foremost, add support and resistance lines to your trading chart. After you do so, pay close attention to the value of the asset when it nears either the support or resistance line. If the asset breaks below the support line, it’s a signal that the value is likely to take a dive. If the asset breaks above the resistance line, it’s an entry signal suggesting that the value of the asset is going to climb. Simply make your trade based on what the breakout is telling you.
Trade Entry Strategy #2: Moving Average Trading
Free Reports:
A moving average is an average price of the stock over a predetermined period of time. With every new day, the last number in the average is removed and the new price is added, which is why it’s called a moving average. Using multiple moving averages, a trading strategy known as moving average crossover trading emerges. Here’s how it all works…
Start by opening your trading chart and adding the 30 day moving average trend line to the chart. Now, add a 90 day moving average line to the chart. These lines will generally follow each other but rarely touch. When the lines touch, the action is known as a moving average crossover, and proves to be an entry signal for traders.
When the 30 day, or shorter, moving average crosses above the 90 day, or longer, moving average, it is a bullish signal, suggesting that the value of the asset is headed for an upward trend. On the other hand, when the shorter moving average crosses below the longer moving average, it is a sign that the value of the stock is likely to go on a decline. Following the signals, make your trade accordingly.
Strategy #3: Trend Based Trading
At the end of the day, successful trading can be as simple as following a trend. For example, let’s say that a financial asset is trending upward. This is seen when the asset’s value sees a series of higher highs and higher lows. In this particular situation, it’s a good idea to enter a bullish trade than a bearish one. Particularly, the trade would be entered when the value of the asset touches or comes very close to the support trend line on a pullback.
When the trend is downward, it’s better to look for bearish trading opportunities. This trend is identified through a series of lower highs and lower lows. When the value of the asset nears the resistance trend line on a climb, it’s a signal for a bearish entry. Just remember, the trend is your friend. It will tell you when to make your move.
Final Thoughts
At the end of the day, trading isn’t a difficult process. While it does take knowledge of the market, by understanding entry and exit strategies, making a good amount of money in a short amount of time is definitely possible. So, what are you waiting for? It’s time to start trading!
By Taylor Wilman