I have seen many traders enter trades recently and get REKT. So i thought I'd share what an entry setup would look like for me (This is my current trade), why i enter here, whats the logic of having lower orders instead of a stop loss and how to properly make use of leverage in these kind of trades.
1. Looking for a floor or ceiling of an asset/token: Now i wont get too much into technical analysis, that would be a tutorial for another time, but what is important here is to note that the price has been held up at this level for quite some time, signaling that there is strong support for the asset and it would probably mean that whenever we see a price movement to this area, there will be a likely bounce either up or down, depending on whether i am taking a long or short entry. Finding these points is easier on higher time frame charts as it gives the overall trend movement.
2. Limit enter into your trade: Since we are likely to see markets bounce off our floor/ceiling, its always a good idea to setup a limit order in these areas, it allows for a more precise entries, bigger profit opportunities, among other reasons.
3. Set up a safety order: Most of us are aware of something called "Stop Loss Hunting", this is when a candle wicks up or down to flush out stop losses placed for orders. The idea here of placing another order instead of a stop loss has two benefits. It allows the trader to keep their position from getting stopped out before there is a possible trend reversal and allows the trader to potentially get a better entry into the trade by averaging out the entry cost, lower or higher depending on the position side.The safety order is also the reason for using low leverage, as it allows for a wider price deviation between trade entry and liquidation prince, allowing the trader to have a wider price range within where they are able to set up a the safety order. It also goes without saying that trades that are entered should be calculated and not in the middle of a trend (refer to point 1).
4. Setting up take profit orders: This is probably one of the biggest mistakes made by traders, they think their order is going well and that it will continue to do so forever. Unfortunately that is not the case, the market has buyers and sellers meaning that price is going to go up and down. Some people use a single take profit and close their order, which is all good. For me, i split it into 3 levels, all which are areas of calculated resistance. my first take profit is set to 40% of the total order, leaving a 60% risk open, the second is and the next resistance level, leaving less risk etc.. At the 3rd TP, if there are still signs of healthy market movements, then the trader can close their initial risked capital and leave only the profit in the trade if they are comfortable .
5. Close the trade and look for the next opportunity: Once the trader is comfortable to close the trade, either because the trade target has been reached or because of the possibility of a trend reversal. He should close up the trade and start looking for the next possible floor or ceiling to set up his/her next trade. It is important to note that trading is a risk and therefore one should not expose their entire portfolio in a single trade. I recommend no more than 5% of a portfolio regardless of how small the trade may seem, success is found in patience.
That's it for this tutorial. Wishing all traders the best of luck!
1. Looking for a floor or ceiling of an asset/token: Now i wont get too much into technical analysis, that would be a tutorial for another time, but what is important here is to note that the price has been held up at this level for quite some time, signaling that there is strong support for the asset and it would probably mean that whenever we see a price movement to this area, there will be a likely bounce either up or down, depending on whether i am taking a long or short entry. Finding these points is easier on higher time frame charts as it gives the overall trend movement.
2. Limit enter into your trade: Since we are likely to see markets bounce off our floor/ceiling, its always a good idea to setup a limit order in these areas, it allows for a more precise entries, bigger profit opportunities, among other reasons.
3. Set up a safety order: Most of us are aware of something called "Stop Loss Hunting", this is when a candle wicks up or down to flush out stop losses placed for orders. The idea here of placing another order instead of a stop loss has two benefits. It allows the trader to keep their position from getting stopped out before there is a possible trend reversal and allows the trader to potentially get a better entry into the trade by averaging out the entry cost, lower or higher depending on the position side.The safety order is also the reason for using low leverage, as it allows for a wider price deviation between trade entry and liquidation prince, allowing the trader to have a wider price range within where they are able to set up a the safety order. It also goes without saying that trades that are entered should be calculated and not in the middle of a trend (refer to point 1).
4. Setting up take profit orders: This is probably one of the biggest mistakes made by traders, they think their order is going well and that it will continue to do so forever. Unfortunately that is not the case, the market has buyers and sellers meaning that price is going to go up and down. Some people use a single take profit and close their order, which is all good. For me, i split it into 3 levels, all which are areas of calculated resistance. my first take profit is set to 40% of the total order, leaving a 60% risk open, the second is and the next resistance level, leaving less risk etc.. At the 3rd TP, if there are still signs of healthy market movements, then the trader can close their initial risked capital and leave only the profit in the trade if they are comfortable .
5. Close the trade and look for the next opportunity: Once the trader is comfortable to close the trade, either because the trade target has been reached or because of the possibility of a trend reversal. He should close up the trade and start looking for the next possible floor or ceiling to set up his/her next trade. It is important to note that trading is a risk and therefore one should not expose their entire portfolio in a single trade. I recommend no more than 5% of a portfolio regardless of how small the trade may seem, success is found in patience.
That's it for this tutorial. Wishing all traders the best of luck!
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