How To Enter A Trade With Increased Accuracy in Only 5 Minutes
Last Updated on June 23, 2021 by Alphaex Capital
How do I increase the probability that a trade goes in my favour and avoid false signals?
The Best Execution Method.
And in this case study, I’m going to show you exactly how I do it, step by step.
How I Used The Best Execution Method to
Reduce False Signals By 80%.
We all get excited when a trade presents itself.
The opportunity to profit is always thrilling.
And never changes after 1,000s of trades.
Taking a loss, on the other hand, is never satisfying.
Especially when you first start out.
You start to question your methodology, the market you are trading…
You spend more time finding out what you did wrong.
Instead, you should stop the excuses and move on.
If you are trading with your money, you should have proved to yourself that you can trade profitably and consistently by now.
The fact is – you will lose trades.
What is also a fact, you will win trades.
Today, I’m going to introduce to you The Best Execution Method which has drastically reduced false trading opportunities for me.
It’s helped me avoid false trades like below:
Just a simple of how I avoided bad trades.
This is the problem with forex trading for beginners.
They are too eager to enter a trade.
Then they question why it didn’t work out.
Yet the solution is simple.
Before I give you the step by step guide, I want to give you a breakdown and why it works so well.
Why The Best Execution Method Does So Well.
The fundamental reason why it works so well is simply because it waits for the market to backup your analysis.
It installs two steps in your analysis:
Stops you from jumping in early
Allows you to take clear action on your analysis with an extra layer of market validation.
With any trading analysis, most common practise for traders is to enter at the exact point when the market provides a signal.
This is great, if you don’t mind the extra level of risk.
But most often than not, jumping in early can lead to losses.
This is because the session going on during the signal candle has not closed, therefore there is no current bias.
If your signal to enter is valid, but the current candlestick is still on going – there is a chance the market can reverse and squash your trade.
Yes, you have a signal – that’s based on your analysis – but you need the MARKET to confirm your analysis too.
After all – as good as you maybe – it’s not your analysis that moves trillions of dollars each day…
… If it does, DM me.
One way to look at it is this:
– I have a valid signal – great
– Now the market is confirming my signal – grrreeeeaaaaat
Which is worse?
A) A valid signal from your analysis, you enter immediately and the current market pulls back to your stop loss. Then rallies back up.
B) A valid signal from your analysis and you wait for the current session to close. You place your order as per the step by step guide. You avoid a market dropping but enter a trade in your favour.
If you said B was worse, then you are the eager traders with a higher tolerance to risk.
Remember not ALL trades are valid.
The Best Execution Method can help give you an extra filter before pulling the trigger.
At the end of the day it boils down to this:
You pay an opportunity cost premium to enter at a market validated price.
The opportunity cost premium is the move between the signal price and the market validated price.
Either way, they both can still produce losses.
The Best Execution Method: Step by Step Guide
The Best Execution Method is used to protect you from entering a signal generated, but not confirmed by market action.
It is used to validate a trading signal generated from your analysis
It prevents you from jumping the gun
Okay, let’s get this trading entry strategy on the road.
Below we are going to go through each part of The Best Execution Method, step by step:
Step 1: Record the Signal Candlestick
So here we go:
The Best Execution Method only exists after a trading signal has generated.
What is a trading signal?
That will depend on your strategy.
In this scenario we will take this nice Swing Trade Pattern to indicate a trading signal.
Again, this can be any signal generated that you follow.
So if you have a different trading strategy, whatever your normal entry rule is – look for that!
As you can see in the example above a swing pattern has formed.
We have waited for confirmation candlestick (Labelled A) to close and complete the pattern.
This has given us a confirmed, signal candlestick.
We apply the start of the Best Execution Method.
Step 2: Set The Entry Level
Okay, time for phase 1.
Before we continue with the example, let me make this step clear for both long and short trades.
If we are looking to Buy the market:
Then we add a Buy Order Limit 1 pip above the confirmation candlestick.
If we are wanting to Sell the market:
Then we place a Sell Order Stop 1 pip below the confirmation candlestick.
The 1 pip can be varied by preference.
2-5 pips work well too.
Why do we place an order above these levels?
Because price CONFIRMS it will go in the direction we want by going higher or lower in our favour.
This one, simple, extra lay can help you significantly reduce bad trades.
Back to the example:
Let’s apply the Entry Level by placing a Buy Order Limit above the previous candlestick’s high.
As you can see in the example, the entry level is now set.
All we have to do is let the market confirm it is going higher, by breaking the previous candlestick’s high.
This would give a positive affirmation that the market will go higher.
Next up is how you can protect yourself, without getting kicked out too early.
Step 4: Set the Stop Loss Level
Using the Best Execution Method also provides a set rule for setting your stop loss.
Again, it is different whether you are buying or selling the market.
But they are just the opposite, so not difficult to remember.
Let’s look at how to place a stop loss level using the Best Execution Method:
If you are buying the market, you need to find the Confirmation Candlestick’s Low.
Then set your stop loss 1 pip below this Low price.
If you are selling the market, you will find the Confirmation Candlestick’s High.
Then simply set your stop loss 1 pip above the High price.
Again, you can toy with this and tweak the pip range as you desire.
Some assets, 1 pip might be too tight.
So you may want to make it 5 pips.
The choice is yours, but now you know the overview of placing a stop loss.
Let’s go back to the example and review the Stop Loss based on the instructions above.
As you can see, I have placed the stop loss 1 pip below the Confirmation candlestick because I am looking to buy the market.
We now have the Entry and Stop loss set.
Now comes the most difficult part of the Method:
Step 4: Let The Market Enter You
Just joking :).
You have to now be patient and wait for the market to move in your favour.
For those eager to enter a trade, sit on your hands.
As Jesse Livermore once said:
“It was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!”
He produced one of the best forex trading books you can read too.
(Highly recommend reading his book too by the way).
Here you have placed your entry at a Market Validated Price.
This means your trade will now only execute when the market has gone in your favour, thus should continue the momentum – giving you a higher quality valid entry point.
This brings out 3 scenarios.
2 of them are in your favour!
Scenario 1: Market moves in your favour, triggers and nets you some big pips!
Scenario 2: Market triggers your order entry, but pulls back and hits your stop loss.
Scenario 3: The market doesn’t break higher as we analysed, therefore the entry price didn’t trigger – therefore – we never entered the trade and saved money for another trade.
Recap of The Benefits Using
The Best Execution Method.
Trading is where you take a shorter term view on the markets, looking to get in and out of them, for a profit in a small time frame.
This timeframe could be minutes, it could be days.
Where as investing is where you have a long term view on an asset with the view it would go up over time. This can yield steadier returns, over time vs. trading for most beginners (in theory of just buying and holding an asset).
In addition, with investing there is an opportunity to earn dividends from shares that will generate an annual income.
This is why investing in stocks is popular because you can not only gain capital appreciation but also potential dividends.
Again, this depends on your financial goals.
Over To You
That’s how you use the Best Execution Method to increase the accuracy of a trade in only 5 minutes.
You can implement this in your trading right now, it’s so easy to do.
The Best Execution Method is something I use daily. I don’t enter a market without it.
It has stopped numerous false signals, especially in times of high volatility.
If you got some value from this post, I’d appreciate a share on social media or leave a comment below.