Aggressive Entry

Unlock Better RvR

Being Aggressive

We’ve all been in this situation…

  • Price moves lower, tags a key level and pops up.
  • The retest comes and you’re getting ready to go long.
  • You take the trade and put your stop in a logical place.
  • Now, maybe the trade works or maybe it doesn’t.
  • You feel you have edge over time, but the numbers just aren’t stacking up.
  • Growth is slow and you just aren’t making enough on your winners.

One solution is to hold the winners longer – fine if the market conditions warrant that. But they don’t always align with a runner.

Another is to trade more size – reasonable, but you only amplify the numbers. You don’t adjust them in your favour. You need a solution that allows you to make more when you are right, and lose less when you are wrong. (Well duh!)

A clumsy approach is to just tighten your stop. We’ve all tried this and it’s the death-by-a-thousand-cuts syndrome. It doesn’t work. So what can?

Being more aggressive with your entry.

Sounds scary right?

It doesn’t need to be… Let’s look at a classic example.

Here’s a 1-minute chart of the DAX.

Let’s imagine you are waiting for a nice exhaustion, mean reversion play and you have yesterday’s low eyeballed as an area to do business.

 
Here’s how you might structure the trade traditionally.

  1. Wait for the test
  2. Wait for a low breach
  3. Wait for a break of resistance
  4. Go long
  5. Stop under the low


And there’s nothing wrong with that. I think it’s a decent strategy.

But, the risk v reward for the trade is poor. Especially in these mean reversion plays off the low, where your exit is often dictated by the price action. Where does the bounce start to run out of steam? (15745 in our example)

Risk = 30pts
Reward = 36pts
RvR = 1.2

The RvR is ok if you have some larger targets but the market doesn’t always want to play that game.

How do we fix it?

Instead of waiting for the high break, we can consider being more aggressive and entering as soon as we see some strength coming in.

  • We are already prepared.
  • We have already seen the first and second tests.
  • So we can pull the trigger as soon as we see some buying urgency after the break.

That’s the beauty of being a screen-based trader, we can react to this kind of stuff.

We see the change in sentiment, we get long and we can even consider putting our stop under that bar low. (After all, if that’s a true ignition bar we don’t want price to come back)

All of a sudden the RvR using the same target but amended entry and stop goes from 1.2 to 2.4 (Even being conservative with the entry).

That’s a significant boost to performance.

Today, think about how you could get more aggressive in your entry.

How could you improve that entry by just a bit?

Enough to really change the maths of your performance.

Pit Bull

Talking of aggressive trading – this is one of my favourite trading books.

It’s called Pit Bull and it’s a great story of an independent trader who played his own game and did very well.

My copy is well-used!

See you tomorrow,

Mark