“There are as many as 10 components to a professional trading system, and the entry signal is probably the least important.” – Van Tharp
So many trader’s spend a huge majority of their time on the best entries into trades when that is not really the most important thing for profitable trading. Here are ten things for a trader to consider that are MORE important than their entry price.
- Entry price is meaningless unless it is a good quantified entry with the odds in the favor of it continuing to go in the direction of profitability.
- Exits are where profits are made not entries. Profitability will ultimately determined on your skill of exits not entries. Trailing stops and price targets are more important than entry levels.
- The risk/reward profile being in your favor is more important the entry price. You want to risk a little for a an opportunity to make a lot.
- Your stop loss is more important than your entry because how much you lose when wrong determines your success more than your skill of entry.
- Your ability to take all entries that have an edge with discipline is more important than any single entry level.
- Position sizing will determine whether you can hold a winner or exit a loser with discipline. Big trades will engage emotions and your ability to trade with a plan.
- A trading plan will determine your success more than just entry levels.
- Trades must be made inside of a methodology with an edge. A single entry is meaningless outside a quantified methodology.
- Your ability to master your risk of ruin as a trader is more important than entries. So your first losing streak is not your last losing streak.
- The market environment itself trumps any entry signal. The market determines whether you win or lose not you and not even your system.
