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Once you have defined what continuity of thought the market is reflecting, you must decide how to profit from this knowledge. As we know, every excellent trader has different rules and/or procedures to enter or exit the market. Your goal at this time is to determine what methodology you want to use to enter or exit, and then use it consistently. |
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The exact method you decide to use will relate to how you determine what the operating mode of the market is, how you define risk, your beliefs, and your money management rules. There are many different entry techniques you could use, and they all relate to your risk tolerance. |
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Suppose a trader has come to the conclusion that the market is, or is about to, demonstrate a strong continuity of bullish thought. Here is a partial list of strategies the trader could use to get long: |
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1. Waiting for a retracement in price: |
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A. To a bullish trend line. |
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B. To a certain percentage of the previous move. |
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C. To retest a previous resistance area. |
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D. To retest a previous support area. |
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E. For a certain price or mathematical formula behavior to occur, signifying an end to that retracement. |
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2. Waiting for the price to continue up and: |
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A. To go through a price that has been mathematically calculated. |
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B. To go up (break through) through a previous price that previously acted as support or resistance in a declining market. |
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3. Waiting for a mathematically derived study to do something. |
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4. Getting long as soon as the continuity of bearish thought has been broken. |
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5. Getting long as soon as the realization that the technicals and the fundamentals are in alignmentthat is, they both have a continuity of bullish thought. |
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There are some huge variations that encompass the above reasons for going long. It is beyond the intention of this book to go into detail on all the possible variations. The critical fact is that you must come up with a set of rules that you trust to get you into a bull move every single time. In all probability when you are done you will be able to fit your exact technique into one of the above classifications. |
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