In the previous lesson, you’ve learned that the first step in planning your trade is by targeting a potential trade area or zone. What’s next?
You’re now going to shoot your shot and find that entry trigger. And this doesn’t mean you’ll simply use the click-and-deal feature of your broker’s platform.
Remember, it’s never based on your guts; it should be systematic and rational. The common techniques used for entry triggers are the Moving Averages (MA) indicators, candlestick patterns, oscillators, and the support and resistance levels.
Read here why you should have entry triggers and why you should consistently journal them.
Finding that potential area and setting entry triggers are the first two in your trade execution sequence.
The potential trade area should be in your trading sight – the market zone that’s visible to your rangefinder.
Why? Because it’s the zone in which you believe carries the highest probability of yielding you high returns.
However, you need to remember that when the price enters the potential trade area, it doesn’t mean it’s the best time to execute your trade. You need to have an entry trigger.
The entry triggers are the market events, behaviors, or criteria that tell you “Now’s the good time to execute that trade”
It could be based on trend momentum drawn by oscillators, indicators like Moving Averages (MA), price action patterns, support and resistance levels, or the combination of them all!
There are often two ways traders approach market entry: either by doing it conservatively or aggressively.
A conservative trader believes that the market is dynamic. Thus, no indicator should be treated as self-confirming. With this, conservative traders often use multi-indicator confirmation is necessary to enter a trade. While wise, this often leads to missed trades altogether.
On the flip side, an aggressive trader jumps into the market at any chance they get – whether that be due to a random, irrelevant signal.
How can they combat these internal battles? They should practice incorporating entry triggers to their trades.
A trade trigger is placed using primary and secondary orders. When one order gets triggered, it signals a potential trade area. The moment the second order is fulfilled, it points to your trade’s entry point.
A trade trigger is placed using primary and secondary orders, when one order gets triggered, it signals a potential trade area. Trade orders that you may use for this are the buy limit order and one-cancels-other (OCO) order.
When you record the entry triggers that led you to take trades, you can revisit and analyze them.
Did certain signals work better than others?
Are specific indicators more reliable in certain market conditions?
By documenting this information, you build a database of valuable insights that can help you refine your trading strategy. Over time, you’ll start to notice patterns of success and failure, which helps you sharpen your decision-making.
One of the biggest mistakes traders make is entering trades randomly based on hunches or emotions. Journaling entry triggers ensure that each trade is based on a rational decision-making process.
By logging the exact reasons you entered a trade, such as a moving average crossover or a candlestick pattern, you hold yourself accountable to follow a consistent system and avoid impulsive trading.
When you know exactly what triggers your entry into a trade, you can better manage your risk. If you notice that certain triggers lead to poor outcomes, you can adjust your risk management rules accordingly.
For example, you may decide to tighten your stop-loss levels or reduce your position size when certain weaker entry triggers appear. Journaling your entries gives you the data needed to adapt your risk management strategy for more consistent results.
Trading can be an emotional experience. By journaling entry triggers, you also track your emotions during the trade setup and execution.
Were you calm and rational, or did you feel rushed and stressed?
Keeping an eye on how emotions influenced your entry decision helps you identify patterns of emotional trading and find ways to minimize their impact on your trades.
As you log more trades with detailed entry triggers, you build a clearer picture of your trading system's effectiveness.
Over time, seeing the positive outcomes from well-identified entry triggers can boost your confidence in your approach.
On the flip side, understanding which triggers are less reliable helps you stay disciplined and avoid bad trades.
There are numerous working techniques that help you find that profitable and safe entry point. Here are some:
Did you know that many traders find it more fulfilling to open and exit a position themselves as opposed to setting an order to automate the trade execution?
It’s because they prefer the certainty of knowing that their trade is indeed in the market rather than relying solely on whether the market will fulfill and trigger their entry.
However, traders have to sleep, or go to the grocery store, or bathe. They have lives and it’s impossible to watch the market all the time, every day.
Now, if they’re away from their trading or charting device, and the price hits that perfect entry point, they miss that opportunity to profit from the market.
That’s why a limit order should be a staple on everyone’s trading system. You’re basically taking advantage of the technology because it automatically fulfills your entry order once the market hits the perfect spot.
Related: TraderUnited - Common Forex Orders: Execute Trades Like a Pro
A Moving Average (MA) crossover is another popular entry technique.
In this strategy, you watch for the moment when a short-term moving average crosses above or below a longer-term moving average.
Read More: TradersUnited - Use Moving Averages Crossovers to Enter Trades
For example, if the 50-day MA crosses above the 200-day MA, it signals a bullish trend and could be a trigger to enter a long position. Conversely, a crossover in the opposite direction may trigger a short trade.