Advantage of entering on anticipation is the small stop size, higher R:R and quick turn of the position to profitability should the trade work out. Also a trader who entered on anticipation often will have more cushion (lower risk) to ride out the noise. A big disadvantage of anticipation entry is higher percent of losing trades and sometimes finding oneself catching a falling knife. Another disadvantage is trader will not miss any losing trades but miss some winning trades.
Advantage of waiting for confirmation to enter is that trader has benefit of market validation of the trader's analysis and market momentum in his favor. Another advantage is relatively higher percent of winning trades. Another advantage is trader will not miss any winning trades. Disadvantage of this choice is bigger stop size leading to lower R:R ratio. Another disadvantage is trader may not breakeven till a sufficient move happens.
Some do a mixed approach like entering partial position on anticipation and entering rest upon confirmation. That is whole another ball game.
I think choosing between anticipation vs confirmation entries is not that easy. Some people probably will be more comfortable with anticipation entries whereas majority will be more comfortable with confirmation entries. I think anticipation entries require more precision and are psychologically bit more harder than confirmation entries. Another influencing factor probably is time frame i.e., ultra low time frames that have smaller opportunity window and size are more suited for anticipation entries.
The above are just my opinions. Feel free to let me know your views.
Advantage of waiting for confirmation to enter is that trader has benefit of market validation of the trader's analysis and market momentum in his favor. Another advantage is relatively higher percent of winning trades. Another advantage is trader will not miss any winning trades. Disadvantage of this choice is bigger stop size leading to lower R:R ratio. Another disadvantage is trader may not breakeven till a sufficient move happens.
Some do a mixed approach like entering partial position on anticipation and entering rest upon confirmation. That is whole another ball game.
I think choosing between anticipation vs confirmation entries is not that easy. Some people probably will be more comfortable with anticipation entries whereas majority will be more comfortable with confirmation entries. I think anticipation entries require more precision and are psychologically bit more harder than confirmation entries. Another influencing factor probably is time frame i.e., ultra low time frames that have smaller opportunity window and size are more suited for anticipation entries.
The above are just my opinions. Feel free to let me know your views.
4 comments:
well put, you said almost to the "T" what I would have commented! well done. Personally, entring on anticipation is of the past (too many losses), thus, be patient and wait for the confirmation, it is worth it!
Hi Anonymous,
Thanks for your comment. I see your point. A large part of my entries are anticipatory though. But that is often because of ultra short time frames and noise level. I prefer confirmation entries on higher time frames though.
Thanks for your commentary. This particular debate has been raging in my mind for years now and basically you have stated what I have thought. What I do is put on a feeler size in anticipation with a tight stop loss. Once the stock confirms my direction, I will add more with a stop behind the lowest recent 5 min bar.
Hi Anonymous, Thanks for your insight. I don't do it currently but have been thinking about splitting position into feeler and confirmation. Testing to check out if that helps is one of my to do list items.
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