Use Price Action Trading Strategies To Find Key Entry Points
Learning to enter at Key Entry Points will do more to improve your day trading results than anything, and you can use price action trading strategies to find key entry points. When I talk about “key entry points,” many people are confused and want to know exactly what I mean by that statement, so I want to explain briefly what I mean by the term key entry points.
A key entry point is simply an entry location on a price chart that gives you the best chance for a successful trade entry. Sure, you may see a price action entry pattern at many different places on your chart during the day, but the high probability patterns will always be at key points, so learning to know where these key entry points are located is very important. By learning to be patient, or stealthy as I like to call it, you will pass up many entry signals to wait on the ones that will improve your success rate exponentially!
It is my experience that the best entry points when trading are always at strong support and resistance areas. This can be flat or parallel support and resistance areas that are found during ranges, or it can be off of trend lines in a trending market. What many traders fail to understand is that a trend line is nothing more than a slanted or angled support or resistance line. If it is a valid trend line, then it will normally hold the same support or resistance value as a flat or parallel support or resistance line.
This means that if you wait on the best price action patterns that form at strong support or resistance lines (including trend lines), you will improve your odds of making a successful trade entry. There are some easy to learn price action rules and patterns that will offer you entry patterns that work 70, 80 and even 90% of the time, so by being patient and waiting on these patterns to form at the right places, you will improve your success rate even further.
Most traders can not wait patiently, and many don’t even understand that they should wait. They are simply taught to look for their entry based on some magic formula or indicator, and then they normally enter at the most inopportune time, and often in precisely the wrong direction too. No sooner than they enter, the market quickly turns and moves strongly against them and they are stopped out quickly or either they have to wait on huge draw downs before squeezing out a very small profit. However, by entering with the strong support or resistance at your back, the odds increase greatly that prices will have better odds of moving in your direction, rather than against you.
We found some really interesting information on this same subject, although call refer to “market structure” in place of “key entry points,” so be aware of that small fact. Here is what Lance Beggs had to say about entry points in a recent article that was posted at www.streetdirectory.com.
Too many people make a critical error in focusing exclusively on their entry triggers, and trying to enter on every occurrence of that signal, without ANY consideration for where that trigger is occurring within the bigger picture market structure.
Too many novice traders spend far too long trapped in this stage of learning. They discover a new trigger and a part of their mind then becomes excited that maybe they’ve found the holy grail of trading. It doesn’t matter if it’s an EMA 10/20 crossover, or perhaps a MACD crossing above zero, with stochastic rising, and RSI above 50. It is NOT the holy grail. It is just an entry trigger.
The fact is:
•Market Structure tells you where to trade.
•Entry triggers tell you when to get in and out of your trades.
Focus on defining the structure of the market first, and then look for a trigger.
Let’s say for example that our entry trigger is a candlestick reversal pattern… in this case a Bullish Engulfing Candle. Where would you find the higher probability trade?
Would it be at the top of an extended rally, where the Bullish Engulfing pattern is pushing straight up into the overhead resistance?
Or is the higher probability trade where the Bullish Engulfing pattern shows that a major support level has held and there is significant profit potential still available from the entry point to a projected target at the overhead resistance level.
It’s exactly the same entry trigger, but obviously the market structure tells us that the second entry is the higher probability trade.
REMEMBER: The market structure (in this case Support & Resistance) tells you where you should trade. The trigger tells you when to get in or out. You can read the entire original article here.
We think Lance is spot on with his explanation using market structure, which is nothing more than what we call key entry points. You can improve your day trading results by doing nothing more than waiting on this key places before entering a trade, and the thing is, you will normally be entering in the opposite direction of the current move, even if the current move is simply a correction in a bigger trend. This usually forces you to sell high and buy low, which is the ultimate key to trading success that evades most day traders.
Take a look at the chart below. Notice the trend line and then the trend channel line. These are nothing more than slanted or angled support and resistance lines. Notice what happens every time prices reach these lines. The red circles indicate a reversal point to the downside and the blue circles indicate a reversal to the upside. These are not all necessarily trades we are suggesting that you would take, so don’t look at it for that purpose. The purpose of the chart is to show you how prices tend to reverse almost every time they reach those areas, so those are key entry points, even if the patterns are not ones we would look to enter on. Hopefully you can see the potential of learning to spot these points, and then increasing your odds even further by adding price action entry strategies as well.
Here is another important factor though. There are actually additional key entry points that fall outside of trend lines and support and resistance lines. We won’t go into all of the different areas and ways to find these points in this article, but just know and understand that these areas exist and you must learn to spot them and know why they form. If you would like to learn how to use price action trading strategies to find key entry points, then you are at the right place. You can learn all of our price action strategies, including how to find entry points like a professional by utilizing the information in our price action trading manual which is located at http://priceactiontradingsystem.com/pats-price-action-trading-manual/.