The Importance of Timing Your Market Entry

If I were given $100 for every time I had a conversation with someone that said they knew that the markets would go in a particular direction I would be happily retired right now. The fact with trading is getting the correct direction of the market is only the start and many people, in fact, most people can get direction right, yet still lose money consistently. I am going explore this in more detail.

I think the reason traders think it is all about direction is more to do with being able to speak to other like-minded people about the markets and be able to say “I knew that would happen” or the ability to have a conversation about the markets to all and sundry keeping it simple enough to be able to make a directional call. This makes “trading speak” or “market speak” something that anyone can talk about because there are 3 options: markets move higher, lower or go sideways. The negative effect of these types of basic conversations is that people talk, make an opinion on direction then see that the direction was right. What happens now is that people think that trading is easy, open an account, start trading and lose the lot very fast. Often this person is left wondering how they can get direction right but still lose?

Enter one of the most critical aspects to any trader’s world. Timing! For a trader to make money while keeping risk to a minimum he or she needs to time their entry superbly well. Timing and market direction can make a trader, however one without the other will break them. You need to time your entry into a trend and how do you do this? The answer is with a strategy.

Take the example below: Where would YOU get in?

A strategy allows the user to have a defined set of rules to follow. This strategy gives the trader a plan of attack. In the above chart we can clearly see a very strong trend and if you were to have the conversation with your buddy you may say I think it will go higher. This is a fair theory based on a strong chart but where do you actually buy? Buying into a trend blindly is very dangerous.

The above chart has been passed as a good trade and has had orders raised on it by me. I know the exact entry, stop and targets for this trade and it was easy as tying my shoelaces to find it and know all the details. I have a number of strategies that I use to make my decisions. Yes, you read correctly, it is the strategies that make my decisions for me. Please take a moment to look at the chart and see what you would do? Can you see this fitting your rules? Do you have rules? Do you think you need rules? If you answered no to any of these questions you need to spend some more time learning about trading and what it takes to be successful.

Remember it’s not about bragging rights and knowing where direction would have gone but actually timing your trades so that you make money that is important.

By Craig Cobb

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