How To Determine the Best Entry Point for Day Trades
How do you know when to open a trade? This is one of the most fundamental questions of trading.
Getting in at the best entry point means you’re more likely to make more gains and not have to worry about false breakouts, right? Wrong.
Finding the best entry point is near impossible in trading. For that reason, this is something you shouldn’t even concern yourself with. What you really want to focus on is the overall trend of the stock.
If you are bought a stock at $3.00 and you sell the stock at $3.50, it does not matter if you bought the stock at $2.99 or $3.01.
The main thing is that 98% of your profit from this trade came from the stock being on the correct trend. It came from having the buyer pressure it needed to push it up to $3.50. Getting in at the best price did not end up playing much of a role in your profits.
Stop thinking about getting in at the best possible price and start thinking about getting in on quality trends.
The first thing to look for when buying a stock is being aware of how fatigued a stock is becoming
You want to be fully aware of how fatigued a stock is becoming. Buyer pressure forces a stock to go up and green candles increase the stock price.
This is the manifestation of firepower coming into the market.
The only reason stocks go up is because more people want to buy the stock than sell it. The more a stock goes up, the less likely it will continue to rise.
That being said, overall trends are still a very reliable source of information that you can look to for information on how to trade the stock.
To overcome these two conflicting pieces of information, you want to buy into high-quality trends at low confirmed buying points.
Look for uptrend corridors and points at which these corridors are being tested at support.
If you look for the lows, or the best time to buy, it would be in an uptrend near the lower side of the corridor. Do not buy until you see a confirmation bounce off of support.
Well how do I know support has been confirmed?
1. If the candle that is touching the support line has a long lower shadow, that means there is a lot of buyer pressure pushing up on the stock. This means there is a good possibility that the stock is going to go up.
2. Buy an uptrend when you see opportunity. Do not buy in after ten green candles. That is called chasing and it hurts more than it helps in most cases. Buy in once you have confirmed higher highs and higher lows. This is where the three green candles in a row can be a helpful bullish confirmation.
How to find the strongest entry points
To find the strongest entry point, you are going to want to look and see how many times the support has pulled through.
In geometry, the first touch is a point, two points is a line, and three points is a trend.
This means that your strongest support lines for entry are ones that have touched the point at least three times.
Between the confirmed uptrend and incoming buyer pressure pushing the stock back up, this is the greatest confirmation of when to get into a trade.
Optimizing your entry point
To optimize your entry point, focus on what the best trend is to be buying into, instead of what the price is.
Once you identify the value in overall stocks instead of trying to pinpoint the perfect price, this will lead to quality winning trends.
In conclusion…
You will never be able to pinpoint the exact bottom or top of a trade. If that was possible, we’d all be millionaires!
The best way to get close to that is to focus on finding quality uptrends versus the best entry points.
To do that you need to:
- Confirm support
- Look for buyer candles
- Buy in after price bounces off support
If you stick with focusing on finding the best uptrends on the market instead of the best entry point, you are sure to improve your trading skills and portfolio in no time!
