Pristine Entry
Rules
Make no mistake about it, traders.
The most critical part of every trade is the entry. Traders who enter stocks
properly and in a timely manner will enjoy a much higher winning percentage than
those who enter stocks poorly. I will even go as far as saying that if you get
the entry right, you have taken care of 85% or more of the entire trade. The
other 15% is comprised of nothing more than money management, trade management
(money and trade management are not one and the same, by the way) and profit
taking skills. Think about it. You can carefully select the right stock. But buy
that stock at the wrong time, and you still lose. You can select the wrong stock
at times, but buy it in a timely fashion, and guess what? You still have good
odds of making money. Entering properly is hands down the most important of the
4 Elements of a Trade.
It should be realized that
every sound trading strategy or plan is comprised of three primary action
points: one entry point, and two exit points. One exit below your entry price
(assuming a long position), better known as the initial stop loss, and one exit
above your entry price, better known as the price objective. No matter how
intelligently you have determined your stop and your target, if you enter the
stock too fast, too slow, or at the wrong price, you run the risk of ruining the
entire trade. What makes this game called trading so difficult is that it is not
enough to know what stocks to play. One must know when to play the right stocks.
"To act now, or not to act now?" That, my dear friends, is the question. To know
the answer calls for a clear understanding of exactly when, where and how to
strike (enter). Let us now delve into this all-important world of entering
stocks the proper way. At Pristine's Trading University, we immerse our traders in three
primary Pristine Entry Techniques. There are more, but these three serve to
cover the vast majority of ways in which we enter our chosen stocks. Let's look
at them now.
PS here is the rest of
the rule is did n't send.
Barry
1) Pristine's Prior High
Entry Rule - Once a
stock is chosen as a buy (long) candidate, we often look to enter it as soon as
it demonstrates the ability to trade higher than it did throughout the entire
prior trading day. In other words, if the stock can trade 5 to 10 cents above
yesterday's high, we enter immediately. If a stock is able to trade higher than
yesterday's high, we can be certain that the bulls are driving its engine harder
than the bears. Tip: We jump on board trains moving in our desired direction,
not against our desired direction. Keep in mind that this basic entry method is
the main one of the three. Of course, one would simply reverse the above when
looking to go short.
2) Pristine's 30-minute
Entry Rule - There
are times when the prior day's high is simply too far away to consider buying
above it. I personally will not let a stock rally $2 before considering a buy.
This in my view is giving up too much of the potential upside potential. For
these scenarios, Pristine's 30-minute Buy Rule comes into play. If the prior
day's high is too far way for our taste ($1.50 or more is the general rule of
thumb), we will look to this alternative entry method which calls for buying
above the high established in the first 30-minutes of trading. At
10:00 EST, we simply mark off the high of the
day. If the stock trades above this high any time between 10:01 and 3:59
EST, we buy,
with a stop below the current day's low. This entry method, while not our main
one, does at times help us get into plays closer to the bottom than the main
entry method above. But it should be remembered that it is largely anticipatory
in nature, which always brings added risk. The stock is only truly strong if it
has demonstrated the ability to take out the prior day's high. It is not
"officially" strong simply because it manages to take out the 30-minute high.
So, one must know when this alternative entry method is truly applicable. Use it
inappropriately, and you can turn good stock candidates into financial
nightmares. Reverse the above for shorts.
3) Pristine 5-minute
Entry Rule - If the
30-minute rule calls for buying a stock above the high established in the first
30-minutes of trading, the 5-minute Entry Rule calls for buying the stock above
the high made in the first 5-minutes of trading. This is a more aggressive
version of the 30-minute rule and is only used by our more advanced traders in
training. When is this entry method pulled out of our arsenal? Usually when the
stock has gapped marginally above our desired entry price. Let's say you wanted
to buy XYZ above yesterday's high of $20. However, when the market opened, XYZ
gapped open for trading at $20.35. This is beyond our 5 to 10-cent rule (see
above), which causes us to employ the 5-minute entry rule. It should be noted
that this rule is applied only to marginal gaps, not large gaps of $1 or more.
The larger gaps take us back to the 30-minute entry rule. As is the case with
the other two entry methods, reversing the above is necessary for shorts.
The creation of these three
Pristine Entry Techniques was the result of years of trading experience. We have
not only taught them to scores of professional traders the world over, they have
been serving us exceptionally well for many years. While it would be impossible
to cover every detail and nuance involved in this subject in the context of this
letter (I could write an entire book on the subject of How to Enter Stocks the
Professional Way), I hope the above has given you a deeper insight into the fact
that entering stocks properly is a science. This science of entering stocks is
an integral part of the Pristine Method of Trading, which is why we spend a good
deal of time in our educational seminars making sure our students become well
trained practitioners of them. There are several more entry techniques that are
very important, but do not lend themselves to the type of plays we issue in The
Pristine Day Trader. Should you truly be interested in becoming a professional
at entering stocks properly, as well as a pro at selecting the right stocks,
managing them properly and exiting them in a timely fashion (all the components
of trading), I strongly suggest that you enroll in an upcoming Pristine Seminar.
Decide to become one of our students, and let us show you how to take your
day-to-day trading to a whole new level. In the meantime, I hope this helps.
Happy Trading!