Many friends have asked me, why is it that I always seem to predict the market direction correctly, yet I fail to execute good trades? Either I enter too early and get shaken out, or I enter too late with a stop loss that's too large, making it impossible to take action.

In reality, many people first forecast a market trend and then casually pick a spot to buy in. As a result, the market doesn't rise as expected, leading to a large stop loss space and significant losses.

Alternatively, the market often retraces before rising, and many people buy at the high point of the retrace. The retracement space is too large, and the floating loss becomes too great, which many people cannot tolerate.

Therefore, in practical trading, choosing a good entry point is very important, and the entry point is not decided on a whim; it is based on certain experience and methodology.

Today, I will share with you the 3 entry methods I use in practical trading, and I will also discuss the scenarios for using orders in real combat, so that you can use them more effectively.

The first method: Market retracement Fibonacci levels + reversal candlestick pattern entry

The most basic structure of market trends is the "N" shape within Dow Theory.

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The structure of an "N" shaped uptrend is rise → retrace → rise, and the structure of an "N" shaped downtrend is fall → retrace → fall.

To add a bit more: This "N" shaped structure is almost the logical foundation for all market technical analysis and technical indicators, such as Elliott Wave Theory, Gann Theory, Chan Theory, etc., which are essentially trading this "N" shaped pattern.

In practical trading, once the direction is established, the market will unfold the second leg of the "N" shaped retrace. When the "N" shaped retrace reaches a support level and forms a reversal candlestick, that's the time to enter.Trading Logic:

The market retraces to test the Fibonacci retracement levels plus the resonance of reversal candlestick patterns to enter the market, which corresponds to the second leg of the "N" shaped pattern where the retracement is in place for entry.

The second leg of the "N" shaped pattern's retracement is a process where the market continues to accumulate strength. Additionally, the retracement tests the Fibonacci levels, which act as support. At the same time, the establishment of a reversal candlestick pattern is required. With multiple resonances, the likelihood of a market reversal is very high.

After entering, if the market trend is established, this entry point is almost the starting point of the third leg of the new trend "N" shaped pattern, and the risk-reward ratio will be very reasonable, achieving more than 5:1 with ease.

In practice, after the establishment of a bullish or bearish trend, wait for opportunities in the retracement market, using the Fibonacci 38.2 as a boundary, and the space between 38.2 and 61.8 as a resistance zone. Enter the market when a reversal candlestick pattern forms within the resistance zone, and set the stop loss at the lowest point (or highest point) of the reversal candlestick.

Trading Mode:

Use manual entry, observing the candlestick pattern when the candlestick closes. If it is a standard reversal candlestick pattern, directly open a position manually on the software.

Notes:

(1) Try to use fixed candlestick patterns, such as: bullish engulfing, bearish engulfing, evening star, morning star, hammer.

(2) Only open a position when the pattern is standard.In addition to the method of entry, there are also articles on how to confirm trends, how to exit, and how to manage funds, all of which can be found in my public account (Eight-Digit Garden). I recommend everyone to read them in conjunction.

The second method: Fibonacci support + breakout of the same-level ZigZag in a smaller timeframe.

This entry method also borrows the N-shaped structure from Dow Theory. All the operations before the entry are the same as the first method. The difference lies in that after the market tests the Fibonacci resistance zone, one should switch to a smaller timeframe and use the breakout of the candlestick pattern to enter the trade.

Trading logic:

The market operates with level switching. In Dow Theory, larger trends are composed of smaller trends. For example, when a bullish trend at the 1-hour level starts, there must be a 5-minute bullish trend that initiates at the beginning of the market movement, gradually expanding to the 15-minute level, and finally transitioning to the 1-hour level.

Just as 1 hour is made up of 12 five-minute segments, a 1-hour trend that lasts for 3-5 days must also be composed of many 5-minute segments.

After the larger trend has completed its pullback, we start with the breakout of the trend in a smaller timeframe, waiting for the market to gradually brew and ferment into a larger trend.

Think about it, this entry method also captures the start of the market movement. In layman's terms, it's like entering a 1-hour trend with a 5-minute breakout. Once the trend unfolds, it will offer a very favorable risk-reward ratio.

Additionally, the pattern of this smaller-level ZigZag breakout is very clear and easy for traders to execute.

Position opening mode:(1) Enter the market using the order entry mode with a pending order. After the "Z" indicator forms an inflection point, place a break entry order at the break point, and set a stop loss at the same time. When the market breaks downward, the order is executed automatically, and the stop loss is also in place. The advantage of this operation is that you won't miss out even if you're not monitoring the market.

(2) Manually open a position by manually entering when the market breaks. It requires constant monitoring of the market, otherwise, you might miss trading opportunities.

Note:

During data-driven market movements, avoid using pending orders for trading. The market can be highly volatile during data releases, and pending orders can easily lead to slippage upon execution. In such situations, manual entry can be more flexible, allowing you to find the right entry points.

Summary:

Both of the above entry methods are trend-following trading entry strategies, both characterized by a very reasonable profit-to-loss ratio. In practice, the exit should at least be set with a 3:1 profit-to-loss ratio.

The third method: Left-side trading logic - Enter in batches with pending orders

This choice of entry point is based on a left-side trading logic, which is an entry method for reversal trends. It is suitable for when the market is about to enter a reversal phase. Within the resistance or support area, enter in batches with pending orders, set a uniform stop loss for all orders, and wait for the market to reverse.

Trading logic:

Market reversal requires a process of conversion between bullish and bearish forces. During this process, there are often many false breakouts in the form of consolidation, which is typically reflected on the chart as a pattern of oscillating upward (downward) movement, or as a consolidation pattern at the top (bottom). Such patterns often result in false breakouts.This entry method transforms a clear single point of entry into an area for entry. Even if the market fluctuates with false breakouts, it will not lead to frequent stop losses.

Main scenarios for use:

(1) Place orders at key support and resistance levels to enter for a reversal.

(2) Place orders to enter for a reversal during market pullbacks.

Opening position mode:

Adopt the order placement mode to open positions. Before the market reaches the support level, identify the order placement point, allocate the position directly for order entry, and set a unified stop loss. Once the order is executed, the stop loss order will also be automatically placed.

Notes:

(1) Since it is left-side trading, a unified stop loss must be set and strictly enforced.

(2) As it is a limit order, during data-driven market conditions, slippage that is favorable to us will occur. When long positions are executed, the price will slip downward, and when short positions are executed, the price will slip upward, which is beneficial for trading profits. Therefore, this order placement method can also be used during data-driven market conditions.

Practical scenarios for order placement in real trading:A pending order, also known as a conditional order, can be understood in layman's terms as an order to enter the market when the market trend reaches a certain condition.

For example, if the current price of gold is 1775, and I want to buy gold but think the price of 1775 is too high, I can place a conditional order on the chart to buy when the price of gold falls to 1700.

The difference between a pending order and a market order is that a market order is entered at the current price, while a pending order can be further divided into a break order and a limit order. Let's discuss them one by one.

1. A break entry uses "buy stop" or "sell stop," also known as a break order.

Buy stop, in layman's terms, means placing a long position above the current price, and chasing a long position when the market rises.

For example, during a rectangle consolidation, if the market breaks through the upper edge of the rectangle consolidation, a long position is taken with a buy stop. Similarly, when a head and shoulders bottom or a W bottom breaks through the neckline upwards, a long position is taken with a buy stop.

Sell stop, in layman's terms, means placing a short position below the current price, and chasing a short position when the market falls.

For example, during a rectangle consolidation, if the market breaks through the lower edge of the rectangle consolidation, a short position is taken with a sell stop. Similarly, when a head and shoulders top or a W top breaks through the neckline downwards, a short position is taken with a sell stop.

Points to note:

Break orders should be used cautiously during data-driven market conditions, as these can cause slippage. Long positions may slip upwards, resulting in a higher execution price for the long order, and short positions may slip downwards, resulting in a lower execution price for the short order. Both situations can reduce the profit potential of the order while increasing the stop-loss space.2. Use of limit entry with buy limit and sell limit, also known as limit orders.

Buy limit, in layman's terms, is placing a long position below the current price, going long when the market falls.

For example, in the chart mentioned earlier, when the market falls and tests the support level, place a buy limit order at the support level.

Sell limit, in layman's terms, is placing a short position above the current price, going short when the market rises.

For example, in the chart mentioned earlier, during the retracement of a downtrend, place sell limit orders at the Fibonacci levels of 38.2, 50, and 61.8, respectively.

Additionally, when trading in a range-bound market, it is also very convenient to use sell limit and buy limit at the upper and lower bounds of the trading range, respectively.

These three methods of entry are very easy to use, and everyone can choose to use them according to the specific circumstances of their trading system. Use limit orders if you don't have time to watch the market, and use smaller timeframes if you have ample time. The reasonable use of orders can improve the efficiency of trading and is very practical.