How to Judge Good Entries when Day Trading the Index Futures

Hey Mike. If the SP futures fall through support and go
straight down for another two points, and I want to get
short, should I enter immediately, two points below support,
or should I wait for a pullback and then try to get short?

Well, you've got to be patient enough to wait for entries
that have two things: first - a high probability of
immediate gain; second - a small potential for loss if the
worst happens and your hard stop gets hit. This principle
applies to all entries and it's useful to think about it
when you're trying to decide whether to enter on a pullback
or a continuation of a move.

Entering on a pullback offers less dollar risk than chasing
the market because you can place your hard stop on the other
side of support or resistance and risk only a point or two.
(Of course, this doesn't mean you're going to hang around
and let the market hit your hard stop if things go wrong.)

Entering on a pullback also gives you a better chance of
gaining a point or so in the first 30 to 60 seconds of the
trade. This is important, though very few people seem to be
talking about it. perhaps it's a well kept secret.

I rarely (almost never) chase the market. Here's why.
Usually, if you chase the market for your entry, you'll get
filled about the same time the crowd's emotion is exhausted.
The market will pull back and you'll have to get out
immediately (if you're smart). If you're stubborn and you
don't get out immediately, you'll have to suffer through the
pullback and *hope* that the trend continues before your
stop is hit. If the market gets close to your stop, you'll
be tempted to move the stop away just a little bit. Once you
give in to the temptation, you've got an expensive trading
habit that may eventually take you out of the business.

Whenever you find yourself *hoping* that the market will
come back and get you out of a bad position, you really have
to head for the exits *now*. Don't even think about the
commission, or all the time you spent waiting for the setup.
just get out.

Question: And what if there is no pullback?

If the market breaks through support and keeps going down
without a pullback, you just have to be a pro and let it go.
All the lost opportunity in the world won't take your
account balance down, but chasing high-risk, low-probability
entries will cost you.

Mike Reed
www.TradeStalker.com