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1.2.3 PUNCH

Be sure about the direction:

While this seems obvious, it can be extremely easy to fall prey to a false trend. Smart Money counts on the retail trader being easily swayed one way or the other, which is why it is so important to identify what belief is being created in the market. Price broke out and started running? Awesome, now figure out whether it’s stop taking or the real thing. If you are wondering if it is the real move or stop taking, chances are it is the latter. Not being sure about the true direction is the reason many a trader has clicked into a trade only to have it slowly (and painfully) sail against them for a whole session before getting snapped out.

Entry:

The perfect entry into a trade comes along every so often when we as traders are actively scanning the charts. Actually catching it at that perfect spot is an even rarer occurrence. Like a bald man in a hair salon, you are going to feel out of place. By their very nature the best entries will be completely counter intuitive in that they look and feel as if price is going the complete opposite direction. Luckily for us though, getting in at the perfect entry is similar to becoming ambidextrous; with some practice it can be done and become more natural. The best entries without fail include one (or both) of two things: 1)Taking out stops; 2)Bouncing off an average price level. If you can coordinate these two things into your entry you are going to minimize your risk and maximize your profit 99% of the time.

Your Trading Plan:

When considering a trade it is of utmost importance to have a solid trading plan. A trading plan will keep your profit taking consistent, your exits realistic, and the trade overall more bearable to ride as it ranges back and forth. A good trading plan consists of : 1) Entry 2) Profit Target 3) Exit for risk 4) Any variables to keep in mind (upcoming news, early exits due to accumulation, etc.). If you form your trading plan and do not like how far you actually need to put your stop to give it decent room, chances are there is a better entry coming. If there are a few places you think price might run to for profit, you should usually place your limit at the closest one. Nothing is quite worse than overestimating your trade and seeing a decent profit turn into a negative.

Managing your trade:

Okay so you entered into your trade and your eyes are glued to your screen. Time has stopped and your coffee is getting cold. At this point you are not sure if you are blinking involuntarily anymore. Why am I holding my breath?  From here on out it is important to reaffirm your Trading Plan and to be realistic with yourself on how this is going to play out. However much we wish it would, it is probably not going to snap in 1 tick 50 pips in our direction (if only). When managing your trade be confident in your judgement and allow yourself to walk away from it. When checking on it, merely see if it has formed a new accumulation zone, or new information has shown itself (unforeseen manipulation). If neither of these things have happened then keep calm and let the trade play out. Time has no bearing whatsoever on whether or not a trade is going to play out in your favor.

 

Remember this rule about trading- When other traders are getting greedy, you need to be scared. When other traders are getting scared you need to be greedy.

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-Shane Guth