As you develop your own trading style and strategy, you will notice that different setups require a different type of entry.
Many traders prefer to preset orders without knowing the full mechanics of this method. However, preset orders can remove emotional conflict and make it easier to stick to the original trading plan.
The downside to preset orders is around the assumption that the trader is not monitoring the price action when the position gets filled, and is not able to confirm that the market favours their plan.
Some exchanges also do not have a feature that allows a trader to set a stop loss alongside their preset order. So their position may get filled only for the market to move beyond their entry point and continue, leaving them in a position that is now in a heavy loss.
As you develop your own trading style and strategy, you will notice that different setups require a different type of entry.
Many traders prefer to preset orders without knowing the full mechanics of this method. However, preset orders can remove emotional conflict and make it easier to stick to the original trading plan.
The downside to preset orders is around the assumption that the trader is not monitoring the price action when the position gets filled, and is not able to confirm that the market favours their plan.
Some exchanges also do not have a feature that allows a trader to set a stop loss alongside their preset order. So their position may get filled only for the market to move beyond their entry point and continue, leaving them in a position that is now in a heavy loss.
Market orders allow for one to confirm their strategy alongside real-time market data and enter immediately. Of course, there are drawbacks to this strategy such as; inexperienced traders may become emotionally conflicted when it's time to hit the button.
Alerts provide the expert trade with a great edge over the market. They've planned the trade to identify the price area where they want to set an alert, when their alert goes off they can quickly monitor the current price action and identify whether or not the market confirms their strategy and then enter.
Use the demonstrations in this video to fully understand the pros and cons of each strategy, and recognise how a professional trader prepares for a trade entry.
Key Points of the Lesson
UTILITY
Pros and Cons of the three entry options.
Can be applied to scalp, day and swing trades.
Choose the method that fits your style and trading system.
THREE ENTRY OPTIONS
Pre-set limit orders.
Market order entries.
Alarms.
PRE-SET LIMIT ORDERS
Commonly used by swing traders.
Positive: removes a lot of the ‘in the action’ emotions and changes of the plan when the price reaches the desired level.
Negative: can cause unnecessary losses.
MARKET ORDER ENTRIES
Commonly used by swing and day traders.
Positive: losses should be less common as you buy from confirmation.
Negative: adds an emotional aspect to the trade.
ALARMS
It is the most common among swing and day traders.
Positive: this allows you to review price action and make an informed decision.
TIPS & TRICKS
Use alerts at the levels that you are interested in trading.
Alert goes off ⇒ review price action, volume, delta, open interest, market structure and the context.
TAKE HOME MESSAGE
Pres-set limit orders involve a higher risk
Market orders involve increased emotion.
Setting alerts and making an informed decision is recommended.