Additional Trade Entry Techniques using Market Flow
The art of reading the market prior to entering a trade & using the correct entry technique
Below is a short video highlighting the techniques you may use to make trading decisions like when to use limit orders at entry spots or to use the T3 Market Flow signals for confirmation at an area. More information on the T3 Market Flow volume analysis is in the next section. For this lesson, a "signal" bar will be any T3 Market Flow bar that is an "arrow," "antenna," "yellow," or "stranded buyers or sellers."
Trade execution Video
You may at times, opt to trade into a potential termination condition or a weaker trigger line look that may have "trouble" on the way to a profit target. Typically this type of trade is taken when there is a strong trend or well-defined momentum on the smaller charts. This type of trend trade is defined as a medium-probability trade and may require a signal depending on your plan.
Per the glossary of commonly used terms:
MEDIUM PROBABILITY TRADE- defined as when most indicators line up for a trade and one or two issues exist. This will be the vast majority of your trades and you will execute medium-probability trades and manage them assertively. If there is trouble in your way, you may take a portion of the position off at that trouble and reduce the risk to a zero-loss level.
A new trader sometimes wrongly assumes that by not taking medium probability trades, their results will improve, and somehow, may avoid the risk of loss which is not true. We prefer to say, if you do not take medium probability trades, you risk losing the opportunity to make more profit. Most experienced traders will execute all medium-probability trade setups and manage them tightly. The sooner you take medium-probability trades, the sooner you will feel comfortable. By giving yourself more opportunities to win, your profit potential may increase dramatically.
Entry timing example using the market flow signal
The picture below is a typical trend trade example that has Fibonacci levels in the way that may or may not break. The rules for a trend trade are true near a potential Fibonacci breakout.A market flow signal will be required before entry based on the "weaker" 13-2 triggers (small triggers inside the large triggers) and the 5-1 chart divergence. The picture below shows the exact moment when you will be waiting for the market flow signal bar.
Waiting for a market flow signal prior to entry
Stop placement example using the market flow signal
After the signal is true, you will enter the market. Place the protective stop just below the market flow signal bar to limit risk. After you enter the market, you must constantly assess the condition of the market. Notice the background is turning red on the 5-1 chart, not an exit, but a warning. Also, notice that the Fibonacci resistance turned red, not an exit, but a warning. Remember you want to give the market a chance to break Fibonacci due to the location of the trigger lines and the "strong" look of the 8-range trigger lines.
Entry after a market flow signal
Risk reduction example using the market flow reversal bar
As the market resumes the trend up to resistance, you will immediately notice the (POTENTIAL) 2nd lower divergence on the 5-1 chart to go along with the red background and red Fibonacci resistance. If the area holds, the market will reverse. If the Fibonacci breaks, it may run a long way to the next Fibonacci area. This trend trade is a very typical example of what happens at "breakout points." Sometimes the market breaks, and sometimes it does not. As traders, we do not guess. It is our job to read and react. As the price reaches resistance, it will now be when it is not worth risking the full amount. It is ok to move your stop to a tighter level and take what the market gives you. We call this managing tightly or reducing risk. Some traders will use the reversal of the market flow chart as a "trailing stop" area. In this case, maybe one tick below the 8-range reversal marker box. If the market does reverse, you may lose 2-3 ticks. A very acceptable loss. If the market breaks the Fibonacci areas, you may get 10-20-30-40 ticks. Giving ourselves the chance to catch the breakout while reducing risk is a learned skill. You will need many repetitions to perfect the art of trading a potential breakout while managing your risk carefully.
When should you move your stop to reduce risk if the conditions change.
Ultimately, the market did reverse, completing the termination of the trend. Fortunately, the HVA trade rule you will learn later in this material, allowed you to use the same area to profit to the downside. Please visit the additional educational material to learn about HVA Trade Rules. The market presented an opportunity to profit from the breakout, limiting risk. At the same time, we maintained the ability to trade in the opposite direction after the breakout failed.
HVA short trade after a failed breakout
Trend trade video
For those who must manage out of 5-1 trend trades and use larger charts to define when it is appropriate to attempt another opportunity using a "continuation style" entry. First, make sure you have your chart reading skills (section to study) at a high level. Before a continuation entry, the market will generally have a bad top or bottom.
CONTINUATION OF THE TREND TRADE ENTRY is with the STRONG TREND that has NOT YET REACHED A FIBONACCI TARGET (usually a pivot not from a Fibonacci area- AKA “bad top or bottom”). The continuation trade uses Fibonacci areas to help define the entry area only after a 13-range chart reversal bar and the 5-1 small triggers have crossed in the trade direction.
Generally, the use of a larger Fibonacci-based chart will be used when determining if you will use the continuation style entry. See the chart below for a common look.
Strong Trend on 21-3 and a pivot high that is a "bad top"
Entry will be taken after the small triggers roll after reaching an area. The picture below shows you two possible continuation style entries.
2 possible continuation style entries
click to enlarge- Continuation Syle entries with the trend
You may also opt to trade “TO” the trend continuation area when a 13-2 divergence is confirmed and the small triggers have crossed beyond the the13-2 large triggers. This gives you the opportunity to trade to the area and from the areas if continuation trade rules are true.
Trading TO and FROM continuation areas
When you rewatch this short video, you will now recognize the "continuation" style technique as it pertains to the Fibonacci areas and mid-bands.
Trigger line reading thinking about continuation style entries