Any trading strategy starts with a universe of securities from which you can make your selection. It's often easy to pick the universe of securities you are going to trade in but harder to know that you’re picking the right ones.
There are many securities to potentially choose from and there are a vast array of factors which can influence the price of a security; So, where do you start? The answer lies in stock screening. Stock screening is a basic stock trading strategy that involves the trader screening the entire universe of securities for potentially favourable investments.
Just like sifting through a bucket of sand trying to find pieces of gold, the same approach is used to reduce your universe of securities to a more favourable selection. After you have reduced the universe of securities you can continue your filtering process, until you find the most attractive candidate for trading.
This filtering process is best defined as strict set of rules. But there is a problem. The problem is that there are as many theories on buy-on-sell price points as there are investors and traders around the world.
Your personal approach to entries should be simple, direct and leave nothing to human judgment. This is contrary to what most traders who buy stocks based on media reports, expert opinions, rumors or “gut feel”. The good news is that by acting contrarily, you will do what most traders never do: make a profit.
Most investors believe that the key to success is being able to pick the winning trades. And this is why 99% of traders, spend most of their time fidgeting with the entry. They are looking for the holy grail. Remember, there is no Holy Grail.
Now don’t get me wrong, proper entry is important. Entry gets you into the trade but it only contributes to 10% of the profits. It would be as if you were building a home and spent most of your time concentrating on the entry way and ignoring the foundation, walls and roof. Your exit and money management (foundation, walls and roof) will provide the other 90% of the profit.
Actually, it has been proven that with good exits and money management, you can even profit on random entries into the market. Take the following real-life example:
| | Tom Basso designed a simple, random-entry trading system. ... We determined the volatility of the market by a 10-day exponential moving average of the average true range. Our initial stop was three times that volatility reading. Once entry occurred by a coin flip, the same three-times-volatility stop was trailed from the close. However, the stop could only move in our favor. Thus, the stop moved closer whenever the markets moved in our favor or whenever volatility shrank. We also used a 1% risk model for our position-sizing system. ... |
| | We ran it on 10 markets. And it was always, in each market, either long or short depending upon a coin flip. ... It made money 100% of the time when a simple 1% risk money management system was added. ... The system had a (trade success) reliability of 38%, which is about average for a trend-following system. |
This best illustrates that although entry is important it is probably the least most important aspect of designing a trading plan. Moreover, most traders “spin their wheels” trying to get in at the proper price, using stops, limits and every other trick in the book even though this is not where the money is made. The money is made by paying close attention to money management (more on this in the next chapter). However, the fact remains you still need some method of entry.
Just as many traders have before me, I too have spent countless hours researching different entry signals looking for that elusive Holy Grail. Would you like to know what I discovered? Quite simply, it is easier to copycat your way to success than to try to re-invent the wheel.
According to Anthony Robbins (The USA personal development guru and lifestyle coach to presidents and famous actors) the way to get the best health is to find the healthiest people we can find and ask them what it is they are doing and thinking to be so healthy. Similarly, the way to select your entry rules is to copy a proven system!
That is how the smart (and rich) people do it.
Sure, you can waste months and spend thousands of dollars testing different methods, but why put yourself through that?
Personally, I would rather be a “wealthy copycat” than a “broke original thinker”.
For this reason (and to shortcut your way to trading success) I have hand picked the best entry systems available for your chosen market. Please, understand I am by no means saying that without these entry systems you will fail, but instead I offer you two choices:
1. You can design your own entry rules, back testing thousands of variables yourself. This can take a lifetime in itself, just look at Fibonacci or Gann who spent the majority of their life perfecting their entry systems.
Or
2. You can purchase a ready made entry system that you literally just drop into my step-by-step plan, confident in the fact that someone else has done all the hard work for you.
Personally I think the choice is easy, but ultimately it is you who must decide because I don’t what know your current time and financial position is.
If you’ve decided option 2 suits you best then look at the proven and tested entry rules that I have hand picked for you based on the market you decided to trade. (If you do not remember which market you chose, go back to the chapter 3 action steps).
These courses will not only educate you on the market you choose but they also provide you with the exact entry rules that you need to include in your trading plan. Click on the corresponding market you selected and purchase your entry rules now:
If you’re still unsure what market to trade I recommend you purchase Bill Polous’ course “Instant Profits”. Armed with what Bill teaches you, you can then choose the market that makes most sense to you.
Your next step is to document your new entry rules. Remember a good set of entry rules are simple, direct and leave no room for human judgment. Take the entry rules from your selected program and write out exactly how you will enter a position.
YOU ARE ENTRY RULES:
After documenting your entry rules you just put yourself into the top 5% of traders. Congratulations!! Over the next couple of chapters, you will begin to move into the top 1%.
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