Entries

If you want to buy the right amount, you need to time your buys correctly. This allows you to risk only a predetermined position of your account and you would also know how and when to exit at a small loss should the name not exhibit desired behavior.

Trending stocks go through push and pull cycles. This means they can take 10 steps forward and 3 steps back. By buying when they are 3 steps behind the highest step in this recent wave, we setup a good reward/risk scenario (Classic Pullbacks). Ofcourse some stocks don't take 3 steps back- they are more likely to go sideways for sometime. In this case we just buy when we make a new high. (Breakouts are like this scenario). Both these are examples of Pull cycles in a stock. You may wonder if we should buy at the push cycle- something like when a stock has taken 5 clean steps forward. The reason we wait to enter is because our stops become too big- we don't have a nearby level to risk against and consequently, our position size is too low.

Usually, you look to buy a stock when it is ‘basing’. This means that the price is moving in a tight range, either perfectly sideways and one where a pivot setups up- the breaking of which signals a clear entry

You can also enter when the base is sloping downward. Wedges are a common entry point because they reject lower levels usually with violence. An astute investor will also look for confluence from either a minor support and volume. When the volume explodes, you know that you’ve picked the popular choice. Volume at crucial levels indicates demand for the stock and the natural flow of the market is to trend upwards. A lot of bad entries happen when the pattern either doesn’t form distinctly or the volume levels are ordinary.

The key point to note is that the only way can repeat entries is to be consistently looking for the ‘same thing’. If it isn’t dead obvious to you, you must pass. The ones which you do eventually take should all look one and the same, have the same thesis. It is only then you can measure outcomes and systematically examine and improve your process.

One must use either of the 4 profit patterns discussed earlier i.e. Wedges, Flat Bases, Cups and VCPs and look to enter with a trigger i.e. Bull Bar, J hook or a Pivot buy.