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Tips for Market Entry: Waiting for Pullback or Retracement

When you have identified trading signals from price action or trends, the tip for entering the market in this trading system is to wait for a pullback or retracement. As the tug-of-war between buyers and sellers unfolds, retracement conditions always occur. In this strategy, you give the market a chance to take a breather after the signal appears before entering the market. This idea is inspired by the approach of a sharpshooter or an alligator patiently waiting for quality prey.

Benefits of Waiting for Pullback:

  1. Market Sentiment Direction: By giving the market a chance to breathe, you can more clearly see the direction of market sentiment.
  2. Optimal Entry Price: Waiting for retracement allows you to enter the market at a more optimal price. This can help you set tighter stop-loss levels, improve the risk/reward ratio, and reduce trading risks.

Example of Optimal Entry:

For example, on the XAU/USD chart, a pin bar rejection is observed at a key support level. By waiting for a retracement on the next bar, the optimal entry is considered slightly above the key support or around 50% of the pin bar range. With this strategy, you can set a tighter stop-loss level and achieve a higher risk/reward ratio.

Avoiding Early Stop-Loss Hits:

Another advantage of optimal entry is preventing early stop-loss hits. By not rushing to enter as soon as the signal appears, you can avoid stop-losses triggered by market volatility. Stop-losses can be placed at the safest level without altering the predetermined risk amount.

Entry Tips to Avoid Early Stop-Loss Hits:

  1. Entry decisions are made after a sufficiently valid pin bar signal forms on the daily time frame.
  2. Wait until the pin bar completes formation, i.e., on the following day.
  3. Entry at the 50% retracement level of the pin bar (50% retrace entry).
  4. Set stop-loss at the length of the pin bar (SL = highest level of the pin bar - lowest level of the pin bar).

When Not 100% Certain About Trading Signals:

If you are not entirely confident in the trading signal but it aligns with your trading plan criteria, entry can be made conservatively. Wait until market conditions are clearer and enter at an optimal level, such as the 50% retrace entry.

Avoiding Entry When Key Levels Break:

Entering the market when there is a strong break at key levels (resistance or support) is not optimal. Instead, wait for a retracement after the break before entering the market. This allows you to enter at a better level and reduce risks.

By following these market entry tips, you can increase the probability of trading success and optimize the risk/reward ratio. Being patient and disciplined like an alligator waiting for quality prey can help you achieve more consistent profits in trading.


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