What’s most important: trade entry, management or psychology?

In the last blog post, I mentioned that a trade entry process, management of the trade and the emotional challenges are each equally important.

The vast majority of the information available to us is, however, based solely on entry procedures.

Some gurus say (and for a good reason) that profitability is a function of the management only and—what is now becoming more realised—the emotional decisions we take with each trade.

I’m staying with the full package, evenly split approach—an exact entry requirement balanced with proven trade management and a no doubt (unemotional) exit strategy.

As for entries, there is a myriad of ways to trade. We have to find what works for us. I use a combination of trend and channel lines, price action and—thanks to Nick’s coding—unique indicators.

The channel lines are provided by James, who has a very natural affinity for this work. To look at the simple trend line structure below, you may get a false impression. Simple but—for anyone that has tried to do this for a living will attest— far from easy. To determine a workable contextual trend with barely one touch is exceptional.

The crosshairs in the chart above represent my short entry position in a trade last week.

The charts below show Nick’s objective indicator of the same trade. The lower red line (green line above if I were long) represents a 50% probability objective based on the yearly bar averages. The white dots are my ‘average true range’ to establish risk, and the shaded red and green areas represent the wicks of the prior daily bar that assist with macro price action.

The objective probability indicator is handy in a ranging or (medium to shallow) trending market.

We can see from the above example—of acceptable probability—how our entry, management and exit process might work in unison.

Of course, it is when it doesn’t go so well that the synchronicity or not of the three elements shows.

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