A Great Way to Avoid Premature-Entry
Are you constantly finding yourself getting in too soon? Are you often shaken out of trades, just to have them go in your way?
Granted, I'm sure a few of you out there are prone to risk-seeking, and are more comfortable entering with a greater degree of uncertainty, one can help yourself is by "waiting for the fight to happen."
What do I mean when I say that? Think of it like two boxers going at it during the opening bell; both are fresh, fiery, and thirsty for blood. Given how early it is in the match, there is no clear victor. However, at some point, either someone will slip, or be caught off balance, and the victor will start to emerge (both in the eyes of the spectators, and the fighters themselves). This is the key moment, when you can make the most of the opportunity. Sure, there will be times when there is no clear indication - someone simply comes in and sweeps the book, a stop run ensues, and so does the flight to safety. However, it is often preceded by a subtle struggle between the opposing forces, mixed with many minor highs and lows, wicks, delta/divergence, and absorption and exhaustion.
Speaking from personal experience, I was a habitual overtrader, and was prone to early entries. I even coined a term for myself for anytime I entered a trade prematurely, but was shaken out before it went my way (a "Hot Potato!").
Now, making the commitment to do this is relatively easy. Anyone can delay their entries, and focus on the price action - but the real work comes in identifying the subtle actions/reactions that happen within the price action. This is going to be largely subjective, but some key indications you might look for (as stated above) might be:
-Failures (most importantly)
-The limit order book (order stacking, absorption)
-Delta (is it pinned, but price isn't moving? Is it slowly drifting to one direction while price stagnates?
Some tips might include:
-A minor failure will often be followed by a sweep of the book (also known as a "second entry" or "two legged pullback."
-A strong impulse in either direction, followed by 50% or more wick will usually result in a reversal.
-When delta is strong in one direction, but price remains still, it infers that market orders are being absorbed (however, it also means that volume in this area is STILL favoring the aggressor; either the aggressors come in with big volume, and sweep the limit order book, or exhaustion ensues, and the defenders start executing at the market. Keep an eye on delta and the order book; you can also use Time & Sales, or a Footprint chart to observe the change in the order flow).
-Making use of the BetterVolume indicator (available for free on the Ninjatrader App Store) and watching for when volume bars fail to meet or exceed the average volume for the last period).
-You can also use the VOLMA indicator on Ninjatrader, or whatever Volume-Average indicator is available on your platform (or if you want to get real fancy, use a VMA and an EMA, and watch for divergences between the two).
I hope that helps! Keep it up brother (or sister)!