Now that we have spoken a bit about a few of the key principles of Market Sorcery, let us now delve further into analysis and discuss another matter of paramount importance:
Choosing your entry.
We feel it is of utmost importance to enter a trade at a location that both puts the odds in our favor, and also increases the odds that we will not have to suffer through any significant unrealized losses.
In our opinion it is clear that the mental aspect of trading stocks is the most damaging to a trader’s odds of success. Therefore it is extremely helpful to eliminate as much of the potential emotional struggle from the beginning of the trade by entering at support or near the lower end of a consolidation zone. Not to mention the effect this strategy has on risk/reward, giving you a much larger profit when successfully buying near lows.
It is also critical to enter the trade at the end of the consolidation zone in reference to time. You want to be in the trade the least amount of time before you receive your reward correct? If so then one must consider this factor before entering a trade and attempt an entry at the end of a consolidation zone and at the lower end of the price range.
Let’s take a look at an example of a trade we took recently to explain in more detail.
In the example above, PTN made a move that we correctly anticipated.
This setup had both the location at the lower end of the consolidation, as well as time at the end of the pattern’s consolidation zone.
Now there is most certainly a fair amount of luck and intuition involved when using this analysis on penny stocks as they are some of the most volatile financial instruments. This is just one example we wanted to use because it was a recent trade.
The truth is that this practice of proper entries will be beneficial to every investment you make, whether it be a high flying “FANG stock”, real estate, a hot new IPO, or a trash bin penny stock.
It is always crucial to buy low and sell high correct? Therefore we must always be looking to enter a trade or investment at the lowest achievable price in a potential opportunity.
After many hours of determined study the adept Market Sorcerer will be able to ascertain which charts are worthy of further analysis and finally a potential trade opportunity.
We will be back with more lessons in Market Sorcery later. In the meantime start looking for charts that are in the lower end of a range and at the end of a consolidation zone.
Post some of your best ideas in the comments for us to review and lets’ start your journey to becoming a Stock Market Sorcerer!
Have a great evening.