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3 Day Hammer Stocks
Stock Price Entry
What do you
spend your time on when developing or using a trading system? If you
are like 99% of traders, you spend most of your time fidgeting with
the entry. You are worried about breakouts or volume surges or ADX.
And if you are, you are wasting your time.
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. It is your exit and
money management that will provide the other 90% of the profit.
me? You can make money with random entries provided you have good
exits and proper money management.
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
What this shows is that most traders “spin their wheels” trying to get
in at the proper price, use stops and limits and every trick that they
can think of and still cannot make money. It shows that you must pay
attention to exits and money management. Think of the money you could
make if you have a good entry system and could exit properly.
I’ll leave you with one final thought:
just seem to want to ignore exits -- perhaps because they cannot
control the market on the exit. Yet for those who want control, exits
do control two important variables -- whether or not you'll make a
profit and how much profit you will make."