SETUP/TRIGGER ENTRY PATTERNS turn the Price/Oscillator Patterns into “no thinkums.” These patterns with mechanical entries can take most of the judgment out of analysis and trading, but only if you can let go of the thrill and excitement that comes with making the decisions. Most of us trade as much or more for the excitement of trading as for the profits. I was one of the best examples of a trader who was above the “trading for excitement” theory, and I used to give a knowing lecture against it at my workshops. It had been such a major part of the daily activity in most of my adult life that I was blind to the hold it had on me. It wasn’t until I had stopped trading for a couple of years that I was able to look back and see that the excitement of trading had controlled my life. It was then that I decided to develop mechanical trades, or “no thinkums,” that would leave me free to enjoy the other aspects of living that I had missed while immersed in the markets for so many years. I am sure that not all people get hooked as deeply as I did, but if you have walked only a part of that path you understand what I mean. And if you haven’t, you are probably going to, unless you incorporate these concepts into your trading.
The setup is the Price/Oscillator Pattern developed through historical research. Using the setup alone means that you have to make the decision to enter the market, to pull the trigger at the time you feel it is appropriate. The Trigger entry eliminates that emotional attachment; not all of it, but a good part of it. The entry is pre-determined by the historical performance of the oscillator pattern and simple mechanical entry and exit techniques that let the price action of the market complete the pattern and trigger a market entry. Trigger entries normally put you into the market on strength when buying the market, and on weakness when selling the market. When buying the market, the Trigger entry would normally be a buy stop above the high of:
- the day (week, month, hourly range, or another time period) that turned the oscillator up; or
- the time period that resulted in the Crossover; or
- the time period that preceded the oscillator upturn or Crossover; or
- the time period that followed the oscillator upturn or Crossover.
For any of the above, the Trigger entry stop could be placed above the next larger time period than the one that turns the oscillator or completes the Crossover. For example, if a daily oscillator turned up, the Trigger entry could be placed above the high of the week in which the upturn occurred.
In some situations, the close of a time period may be preferable to exceeding the high, or a pivot Point may be used (see Chapter Fourteen, “Trading and Money Management”).