Sometimes a slight change in perspective can make ALL the difference.

The light bulb comes on. And what was once hidden is now blindingly obvious.

It’s my hope that today’s article may well provide someone with one of these paradigm shifts, as it relates to the mindset required for trade re-entry.

If you operate with wide stops and a single attempt only at each trade idea, then this might not be for you. But for those of you who prefer tight stops and active trade management, like I do, you absolutely must be able to re-enter a position. And to do that effectively, you need the right mindset.

The article comes courtesy of some email Q&A with a trader, who commented as follows: 

You always seem to know when to re-enter. I usually don’t see the re-entry till it’s too late and then I miss the move.

I can promise you I don’t always get it right! And I don’t always catch a re-entry opportunity.

But further discussion with this trader revealed a significant difference in our thinking as the first trade is exited (regardless of whether it’s scratched, stopped out, or exited at the target):

<image: The Mindset Required For Re-Entry>

It’s a subtle difference. But here’s why it is important:

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

I trade with a slightly unusual idea regarding trade exits.

Most traders will tell you that the trade is over when your exit order executes and your position is flat. I disagree.

When you’re flat and have no risk in the markets, you’re often able to see the market in a much clearer way. So take advantage of this.

Here’s how an exit works:

  1. Your position is flat either through scratching the position or execution of a stop or target order.
  2. Do not relax focus. Reassess now with a clear mind and no risk exposure. Is the exit premature? Is the premise still valid?
  3. If the trade idea is no longer valid, ONLY THEN IS THE TRADE OVER.
  4. If the trade idea is still valid, then find a way to re-enter.

What does “find a way to re-enter” mean?

It’s not always as simple as just hitting buy or sell again, at market.

All my standard YTC Price Action Trader criteria for entry must still be valid (for a summary see Vol 3, Ch 4, P 81).

In particular a clear and obvious new place for the stop. And some kind of lower timeframe trigger pattern.

Let’s walk through some trades that didn’t quite go to plan. 

<image: The Mindset Required For Re-Entry>

Yes, this is a breakout pullback. Very aggressive in that the pullback is all within one candle (hidden on this timeframe). But in an opening drive, this may be all the market offers.

Let’s see how it plays out.

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry>

<image: The Mindset Required For Re-Entry> 

Again, here’s how an exit works:

  1. Your position is flat either through scratching the position or execution of a stop or target order.
  2. Do not relax focus. Reassess now with a clear mind and no risk exposure. Is the exit premature? Is the premise still valid?
  3. If the trade idea is no longer valid, ONLY THEN IS THE TRADE OVER.
  4. If the trade idea is still valid, then find a way to re-enter.

Remain focused and alert.

EXPECT RE-ENTRY, until the market proves otherwise.

This is the mindset required for effective re-entry, to ensure that you’re not sitting on the sidelines watching frustrated as the move happens without you.

Happy trading,

Lance Beggs

 


 

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2 Comments

  1. This trade sequence is perfect because this is what trading is like most of the time. It mostly doesn’t go as planned, but for those that trade with edge it’s expected, accepted, and never rejected. I imagine the partial then break even is your bread and butter trade because it happens most often. But your trading methodology and management allows you to always be ready for the more aggressive targets. You’re quick to stop out if the price structure doesn’t match the picture in your head; allowing a good chance to have a favorable avg win to avg loss ratio. When your ideas aren’t working, you create a “no trade zone” and wait for price to enter in that new area and rinse and repeat the whole process over again. On this level trading is easy. I understand exactly what to do. I’m sure that even I could convince some that I’m some kind of trading expert. But I’m still digging my way out of whole I made during my first year of trading. I know what to do but my emotions often keep from trading like you. I’m not hopeless and I’m not helpless, but trading is so hard. I believe it takes many years so I’m staying small for the foreseeable future.

    1. Hi David,

      It’s never easy. You just get better.

      Yes, keep small. And work your way out of the hole. Confidence is contagious. Set goals and targets that stretch you, but at the same time are achievable. Slow and steady.

      Remembering at all times that the REAL source of growth is in the work you do outside of the trading day. Review… and improve.

      Best of luck,
      Lance

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