I think most professional traders already know the secret of a perfect trade entry, but it’s the newbies who insist on searching for the Holy Grail of trading. Well, you need look no further because the secret of a perfect trading entry is that there’s simply no such thing as a perfect trading entry. Unfortunately, you’re never going to find that perfect magical indicator that tells you when to get in and when to get out.

As I’ve just mentioned, while the pros are aware of it already, those who are new to trading need to accept the fact that a “perfect” indicator does not exist.

What is it that drives people to believing that it does exist?

According to dr van tharp who is himself a much respected trading guru, the reason lies in the fact that many novice traders believe that if they’re actually involved in the selection and entry into a trade, they somehow have some measure of control over the market. He also goes on to compare this phenomenon with the behaviour of many people who play the national lottery. Of course the lottery players he’s referring to are those who favour choosing numbers which are relevant to their personal lives, such as birthdays, anniversaries, and etc.

These people choose these numbers because they believe the numbers are ideal, thus giving them a greater chance of winning. Of course, their combination of numbers has the same chance of winning as any other combination would have, but the difference is, there’s a certain degree of emotional attachment involved. This tends to impart a feeling of power and/or control over the final outcome and this is the exact same reason why traders want to do the same with their trade entry.

What you need to realise is, you are in total control of your circumstances when you enter into a trade. Only you can decide whether or not you should proceed or back away. On the other end of the scale, once you’ve actually entered into a trade, you have absolutely zero control over the way the market behaves.

Contrary to what you may currently believe, the amount of money you make on a trade depends primarily on how much you put into a trade and when you exit the trade, and not when you enter it.

Let’s try and shed a bit of light on this by looking at an example:

You’ve decided to buy some stock and according to the trading system you use, you should buy at $10 and exit at $12. Now let’s consider two scenarios. In the first one you have $1000 and in the second you have $5000.
1) You purchase 100 $10 shares with your $1000. When they reach the $12 mark you sell and as a result, you rake in $200 in profit.
2) With your $5000 you are able to purchase 500 $10 shares. Here again, once they hit $12 per share you sell. This time your profit stands at $1000.

So, as you can see in the example above, the amount of money you make is determined primarily by how much you invest initially, and not by your trade entry. This is in fact the very foundation of good money management.

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