We want to Enter EARLY either at the beginning of a Reversal – preferably on a relatively high Time Frame such as H1, H4 or DAILY- or a Correction – only from M15 or M5 Time Frame. On ICHIMOKU KINKO HYO, the earliest Signal that price is changing direction is Price/Tenkan Sen Cross. But this is not enough because if price just closes above/below a Flat Tenkan Sen, it can continue to the previous direction right after. So we need a confirmation about price’s intention to go to the new direction and that is Tenkan Sen’s inclination. If we are going to BUY , we want to see Tenkan Sen angled or curved UPwards and if we want to SELL, Tenkan Sen must be angled/curved DOWNwards.
But since our money is at stake, using multiple confirmations before we Enter is IMPERATIVE. One of the most useful Indicators we’re using is Bollinger Bands System. BBands show price action’s volatility, and range but they also show direction. If Upper and Lower BBands are price action’s “muscles”, Median BBand is price action’s “bone”. So when the Median BBand is forming a “knee” going Up or Down, we get a very strong confirmation about a change in direction.
Furthermore we need to look at Chikou Span (ICHIMOKU Green Line which is price action’s clone shifted in the past) because this magical line makes things happen when it crosses past price action and here is where another extra confirmation comes from.
And of course Stochastics must both go to the same direction confirming our Entry.
So here are the Basic ENTRY Criteria we should be looking for :
BUY if :
1. price CLOSES above Tenkan Sen
2. Tenkan Sen is angled/Curved UPwards
3. Median BBand is curved UPwards
4. Chikou Span has just crossed above past price action going UP
5. Stochastics are both going UP
SELL if :
1. price CLOSES below Tenkan Sen
2. Tenkan Sen is angled/Curved DOWNwards
3. Median BBand is curved DOWNwards
4. Chikou Span has just crossed below past price action going DOWN
5. Stochastics are both going DOWN
Depending on the Market’s Condition and the Trading Strategy we’re going to use, we may be looking for some extra confirmations or even fewer.
SL Placement is based on the basic principle that we only take a Risk to allow price fluctuation to go as low as a strong Support Level can allow when we BUY, or as high as a Strong Resistance Level can allow when we SELL.
SL Trailing is an essential part of Trade Management serving the 3 priorities :
1. Eliminate RISK
2. Lock Daily Pips
3. Maximize Profits milking the Trend.
Depending on Market’s Condition :
1. There is no need to Trail our SL on a Rangebound Market
2. We can use Kijun Sen or Fractals corresponding to Higher Lows on Uptrend and Lower Highs on Downtrend when the Market is Trending and of course there are detailed SL Trailing Criteria per Strategy
3. When trading the Breakout after a Consolidating Market, we can either pick one of the various SL Trailing options or EXIT as soon as possible either using the Take-Profit placement Rule (placing TP at 2/3 of expected move’s length) or using one of the STAY-IN/EXIT Criteria.
STEP #6 Rules :
Successful Traders make more money WAITING than Entering Trades. This happens because they’re true “Bosses” of their trades. They WAIT for ALL Entry Criteria to be met before they Enter. They WAIT for the move to get exhausted before they EXIT. They don’t rush. They’re extremely slow -turtle slow- with their Entries seeking multiple confirmations.
For every Trade Set Up, you should be aware of the Market’s Condition in order to pick the right Strategy and in most cases you must see candlesticks CLOSE -except if your Strategy’s Criteria mention cross and no close or if you see a Breakout Candlestick which has a body bigger than the last 10 candlesticks and moves to one direction only- before you Enter.
SL Trailing is not always a blessing. It can be a Trader’s Plague when applied wrongly. Some of my best trades were the ones I neglected Trailing my SL. I know there is the reasoning that “well, if I’m stopped out, I can always re-enter” which is correct but impractical. Because if you are stopped out of a great trade that took you hours to study and Enter because a silly spike hit your Trailed SL, you may FREEZE, you may make all possible mistakes and invent even more, you may get out of sync out of tune out of balance with your own thinking as you’ll be watching price going to the initial direction making hundreds of pips for other traders but not for you. Except Swing Trading -RangeBound Market’s Trading- and Scalping, where SL Trailing doesn’t apply, there is plenty of empirical evidence that you should let the trade evolve without Trailing your SL. I know this sounds contradictory to what I have already described as “SL Trailing benefits”, but I suggest you Trail your SL till you reach the level of confidence to let the trade breathe freely and evolve without you approaching or almost “touching” price action in a rather masochistic mood.