Entering Trades with Market Confirmation 

Content Details 

• Summary: This article discusses the importance of waiting for market confirmation before entering a trade. It explains how traders can ensure their opinions align with market actions and the benefits of entering trades promptly once confirmation is received. 

• Target Audience: Intermediate traders who have a basic understanding of trading principles and are looking to improve their trade timing and decision-making process. 

Expanded Response 

Quote: "Only enter a trade after the action of the market confirms your opinion and then enter promptly." 

• Definition: Market confirmation refers to the process of waiting for the market to validate your trading hypothesis before entering a trade. This means observing market actions that align with your analysis and then making a prompt entry. 

Stages: 

• Forming an Opinion: Develop a trading hypothesis based on your analysis, which could include chart patterns, technical indicators, or fundamental factors. 

• Waiting for Confirmation: Monitor the market for actions that validate your hypothesis, such as breakouts, trend reversals, or significant volume changes. 

• Entering the Trade Promptly: Once the market confirms your opinion, enter the trade without delay to capitalize on the expected price movement. 

• Example in SPX: As of now, the current price of SPX is 4400. Suppose your analysis indicates a potential breakout above 4450. Instead of entering a trade immediately, you wait for the SPX to break and close above 4450 with increased volume. Once this confirmation occurs, you promptly enter a long position. 

• Practical Application: Traders should use confirmation signals to avoid premature entries that can result in losses. Confirmation can come from various technical indicators like moving average crossovers, price closing above resistance levels, or high trading volume. 

Trading Strategy: 

• Breakout Trading: Wait for the price to break above a resistance level or below a support level before entering a trade. 

• Trend Following: Use moving averages or trendlines to confirm the continuation of a trend before making a trade. 

Risks: 

• Delayed Entries: Waiting for confirmation might result in entering a trade at a less favorable price. 

• False Confirmations: Sometimes, the market may give a false confirmation, leading to potential losses. 

Indicators for Identifying and Trading with Market Confirmation: 

• Moving Averages: Crossovers can signal confirmation of a new trend. 

• Relative Strength Index (RSI): Can confirm overbought or oversold conditions aligning with your trade hypothesis. 

• Volume Analysis: Increased volume on a breakout can confirm the strength of the move.