Entries and Exits - continued
Entering a trade on a weak down bar just above a bullish trend line
|The optimum place to enter a trade, once a stock or future is trending, is when the price is near its trend line. The risk is very low because the protective stop can be placed right below the entry and also under the trend line. Contrast this with buying at a new high and having to place your protective stop under the previous low.|
Bar 'A':This bar bounced off the bullish trend line and had lower volume than the previous two bars. Two bars before, a very high volume down bar also stopped at the trend line. An up bar the next day confirmed that the big volume on the previous day had a lot of buying inside it. The low volume at bar 'A' shows that the selling pressure has dissipated.
Summary: Had you entered at the close of bar 'A' and sold at around 53 (after the two-day bearish turnaround) the profit would have been over 11% in a little less than a month.