Entry Zones II

BarroMetrics Views: Entry Zones II

The second question this week comes from John (pseudonym). John attended the final Habits of Success Seminar I gave in Singapore. He has been struggling with the idea of zones. The Word doc contains the charts he sent me of the FTSE.

In Habits of Success, I taught this analytical process:

  1. Identify the trend of the the timeframe you are trading; determine if this trend will continue or change. The answer gives you your strategy.
  2. Identify the short term bias of the timeframe.
  3. Identify the short-term structure of the timeframe. (2 and 3) will lead you to identify where you want to take a trade. (Zone).
  4. Identify your initial stop, and approximate entry price. You now have risk.
  5. Identify the exit for your core profit contract. You have reward.
  6. Ensure the reward:risk is adequate for your win rate.If so,
  7. Take the trade
  8. Determine how you will manage the trade.
  9. On an bar-by -bar basis take the new information and change, if necessary, the trade management.

Before answering John’s question (how would you determine the zone?), a few contextual comments:

  • John is trading the weekly timeframe.
  • The instrument John chose is the UK 10.
  • He is using CMC’s charting platform.
  • He appears to have assumed the trend is up and is looking for an entry zone, and the entry pattern.
  • He did not send me his view of steps 1-9; and I have assumed he has not gone through the process.
  • I use one period swings to identify the magnitude of moves of a timeframe. Thus the one period swing on a weekly chart, defines the weekly trend.
  • I teach that a change in trend in one timeframe usually means a change in the line direction of the next higher timeframe.
  • Normally, in Habits of Success, we look at the weekly timeframe as the timeframe that defines the trend; it is also the first timeframe where we would look for a zone. BUT IN THIS CASE…..

….more next Blog…..

ftse-johns-hw.doc

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