Choosing the right entry point or market timing - Cryptocurrency exchange platform

The first step is obviously the entry into the market.

The key to successful market entry lies in whether one can improve “reliability,”

which is called “enhancing the ability to choose market timing.”

Any investor wants a “good” entry signal,

whether they are a value investor

or a price speculator.

Value investors hope to find an “undervalued” signal,

while speculators hope to find a signal that is about to rise.

Although in the entire investment trading system,

the entry stage accounts for only a small part,

it is nonetheless an indispensable step,

and some effort should be dedicated to finding suitable entry methods.

The author believes there are two ways to find suitable entry methods.

The first is to find high-probability entry signals,

the second is to find entry signals that can bring high R-multiplier.

The latter completely changes the way of thinking about trading.

The first method to discuss is the random entry method.

This method involves randomly determining the trading direction,

with equal probabilities for long and short,

which is like flipping a coin.

Heads means going long,

tails means going short,

and stop-loss is set at a price three times ATR.

If after entry, the price moves in the direction of the position to form a trend,

then the trend is tracked using a pullback or rebound of three times ATR.

Each entry uses 1% of total capital as risk to calculate position size.

This system operates on about 20 different futures contracts.

According to the author’s research,

this system has only a 38% win rate,

but over the long run, it can almost always make money.

Although each simulation yields different results,

sometimes earning more,

sometimes earning less.

In fact,

this entry method is no longer just a simple independent method,

it needs to be combined with other key parts of the system to be effective.

At this point,

it becomes clear why the author calls it a “change in thinking”!

Next, the “fixed days out of market” method by Charles Lebo and David Lucas is introduced.

They used various types of entry signals,

but the only exit technique was to leave the market after 5,

10,

15,

or 20 days.

Results show that most entry indicators do not perform better than random entries,

including common moving average crossover entries.

Next is the channel breakout method.

Buy when the price exceeds the highest point of N days,

sell short when it drops below the lowest point of N days.

This way, no upward trend or downward trend is missed.

Exits can be set using a channel smaller than N as a take-profit level.

For example, entering on a 55-day breakout,

exiting on a 13-day breakout.

Its win rate is not higher than the random system,

but its profit curve is more stable.

Then there is the visual pattern entry method.

Including patterns like gap,

peak,

pullback,

large volatility,

triangle,

flag,

circle,

wedge,

island, etc.

There is no reliable evidence to prove their win rates.

Another method is volatility breakout.

Similar to the exit used in the random entry system with 3x ATR,

enter when price volatility breaks through 3x ATR.

The ADX directional movement indicator can also be used as an entry method.

Additionally, methods like moving averages,

weighted moving averages,

exponential moving averages,

adaptive moving averages,

RSI oscillators, etc.