Why market entry isn't the most important thing
Entering the market is easy. Many people think trading is easy because they can simply click the buy or sell button and take a position. Inexperienced traders believe that if they can find the perfect entry pattern, they can make a lot of money.
Understanding fundamentals and technical analysis are essential for building a trading strategy. Without this knowledge, it is impossible to identify entry and settlement points. However, even this is not enough. Profitable traders know that controlling risk and maximising profits are also essential for trading success.
To ensure steady profits, you need to have clear profit and stop-loss levels. Technical analysis can determine good settlement points. If you apply risk management rules, adjust your position size, and follow your trading rules, you can expect to improve your win rate and the overall profitability of your trading strategy.
Economic indicators and news can severely impact the profit and loss of a particular trade as well. In some cases, these may cause positions that should be profitable to turn negative. Always exercise caution before and after news events, because the market can be extremely volatile. Sometimes it's better to close out your position entirely to avoid potential losses from volatile news events.
Even if two traders enter the same trade, their exit strategies may differ, resulting in very different outcomes. Consistently profitable traders will have a clear exit point as well as an entry point. Traders who focus only on the entry point, but don't have an exit strategy, will probably fail, even if their entry point is good.
Entering is easy. But it is not enough. The best traders know where the settlement point is. Understanding the limitations of entry strategies alone and practising and analysing different exit strategies will improve your trading results.