This is a bit like the chicken-and-the-egg question: which came first? For traders of Forex and other instruments, what is the first thing you look for: a good entry or a good place to take profits?
I’ll make an educated guess that the majority of retail traders, including readers of this blog post, look for good entries before considering anything else. That educated guess is formed from the number of requests I receive, asking for me to code indicators or robots using a combination of squiggly line indicators (like moving averages and oscillators). How many of you have toiled for weeks or months, or even years, trying different combinations and settings of indicators in the fruitless search for perfect trade entries? You think you find the holy-grail of entries only to then see consolidation periods destroy your account … back to the drawing board you go. A recent request for a squiggly-line-combo system inspired the writing of this blog post, I wrote something similar a few years back.
Now for another educated guess: the majority of professional traders carefully consider where price might be going to, as well as where it might find resistance, long before they’re thinking about entries. Professional technical analysts will look at a confluence of factors: supply and demand, support and resistance, Fibonacci expansions and extensions, harmonic projections, etc.; and not forgetting eWaves target zones of course. The pro’ traders will have a pretty good idea of the price magnets and probable sticking points; on current and higher timeframes, before they’re ready to commit their funds to a trade (all this is explained in the Free Forex Trading Course).
You start a journey knowing where you are going to; you don’t just get in your car and drive, without a destination and plan for getting there (unless you’re just out for the fun of driving).
If you really must use your super-duper-magic-combination of squiggly line indicators for entering a trade, use them to get the best risk:reward entry to trade in the predetermined direction to a predetermined price level. Don’t use them if you have no idea where price might be heading to. You should never find yourself doing stop-and-reverse trades this way: the undisciplined trader’s approach to destroying accounts in double-quick time. You don’t change your mind on the direction of the market because one trade goes against you; if you do, then you seriously need to take a long hard look at the charts again, to see why your previous bias was so wrong and to qualify the new bias, before you place another trade.
Your take-profit levels should ideally be the strongest price magnets that offer the path of least resistance. Once you have identified those levels, you can look for entries that offer an acceptable return on your risk: ideally more than 2 to 1, so you don’t have to be right more than 50% of the time, to make a nice profit in a month.
So what should come first (in a trader’s mind): the entry or the exit? eWavesHarmonics provides for both. switch to a higher timeframe of your choice, make your own copies of the plotted levels, relatively near to the current price (add the word ‘KEEP’ to the object names, so the ‘Clean’ button doesn’t delete them), switch back to your preferred timeframe and plan your trades.
Trading doesn’t need to be a stressful random act.