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