In my market analysis, often an ETF or stocks are not included because there is no favorable risk entry point. A poor entry level generally causes the worst losses whether you are an investor or trader. Even if your buy or sell setup does happen to fail, a good entry point can be the difference between a small and a large loss.
In trading, and teaching technical analysis for three decades, I have also come to realize that each person has to find a method that suits them individually. One of my favorite entry methods is to buy at a Fibonacci retracement level after the weekly and daily analysis have confirmed a low. But some are not comfortable using Fibonacci analysis in their trading.
As I discussed in detail (Finding High Probability Entry Levels), establishing a long position as a market corrects to between the 38.3% and 50% support levels is a very good way to obtain a low risk entry level.
Successful investing or trading is all about risk control as taking a 15-20% loss can be disastrous to your portfolio. This type of loss is generally the result of either not calculating the risk before you take a position or not using a hard stop.
In my recommendations, I use a number of different methods to determine both the entry as well as the exit levels. Some are based on the action of indicators but others are not quantified but come through many years of experience (Finding High-Probability Entry Levels).
In this week?s trading lesson, I want to look at how you can use the relationship between price and an exponential moving average with starc bands to determine when the risk is too high to buy or sell.
Often when a stock or ETF is in a solid intermediate-term trend, it can provide a number of good trading opportunities for those who are more active. In my Charts in Play column, I generally try to stay with the intermediate-term trend and therefore do provide shorter-term trading advice. The exception is when a position reaches a high risk level and I will recommend taking a partial profit.
Source: Markets
