Entering or exiting into the new trade position at the right time and at the right level is one of the very important aspects of making your strategy profitable. If you enter at the right level you will not only avoid the stop losses but also have a better chance to get the returns when the stock or market index moves as per your expectations.
When creating the long position, entering at the lowest levels has a better possibility of giving returns. While on the upper side booking the profit at the highest point is the right trading strategy. However, finding the right entry and exit point is not possible for everyone, especially if you don’t have an idea about trading and technical analysis. So, the question arises here how to find or determine the entry and exit points in the stocks.
How to Determine or Find Entry and Exit Points in Stocks?
To determine the entry point you need to analyse the price trend on the chart and also use various tools and techniques that will show the best levels. There are various points you can choose to enter or exit into a trade position. Here are a few points you need to determine while finding the entry and exit points in stocks or the main index.
Breakouts & Breakdowns
Breakouts occur at the resistance levels, where most of the time stock price or market index stops or turnaround from a bullish to a bearish trend. However, when bulls are dominating such resistance breaks and when the stock price comes out from this trajectory it is called the breakout point where you can decide to enter into a trade position.
Similarly, at the lower side, there are support levels where a falling stock price or market index stops further moving. However, when bears are dominating this support level breakdown creates a selling opportunity for the traders. Here either you can exit from your selling trade position or book the profit that you are gaining from short-selling.
Support & Resistances
This is like the support levels where the stock price of the market index pulls back in an upward direction. The market never moves in a straight line direction, there is zigzag movement, and whenever the price comes at the support levels giving the opportunity to enter into a new trade position.
Similarly, there are resistance levels from where the stock price turns back where you can enter into a short position or book the profit of a long position. Make sure the price does not break this resistance level otherwise, there will be a bullish trend and you should create a long trade position from here and wait till the uptrend continues.
Use the Open Interest Data
If you are looking for entry and exit positions in the future and options market, then you can use the open interest data for trading decisions. The coordination of change in open interest with change in price shows a bullish and bearish trend in the stock or market index.
You can analyse the open interest data to decide whether to enter or exit from the individual stocks or market index. An increase in the open interest with an increase in price shows there is the possibility to move the stock in an upward direction, hence you can enter with a long trade position and similarly, there are other signals with change in open interest.
Low and High Swings
Swing trading can also be used to decide the entry and exit positions in the stock market. In TradingView when the market trades in a range there are high and low points providing the swing trading opportunity for the traders. You can use these swing points for deciding the stop-loss while entering into the new trade position.
However, swings can also be used for making trading decisions but it is possible when you analyse the swings with the right chart patterns. You can also use the various technical indicators that help to know the right levels of buying or selling where you can enter into the trade positions. These indicators will also help you to know the entry and exit points with a better level of accuracy.
The Price & Chart Patterns
A technical analyst with experience of reading price action knows how important these candlesticks are in predicting price, direction, and trend reversals. When the price action is complemented by candlestick chart patterns, it completes the picture over a bigger time frame and also acts as an indicator of entering or exiting trade in the stock market. There are different types of candlestick chart patterns to identify the trend, entry and exit in stock and market indices.
Entry and Exit Indicator in TradingView
You can follow the above-discussed tools and techniques along with technical indicators to find the entry and exit points. And to get best experience while applying and analysing with technical indicators is TradingView.
5 Best Entry Indicators in TradingView:
1.Moving Averages
Moving averages (MA) are one of the most common and widely used indicator used by beginners and professionals. MA can be used to identify support, resistance, or buying levels in stocks and indices. There are two types of moving averages that are generally used by participants in the stock market, i.e.
- Simple Moving Average (SMA)
- Exponential Moving Average (EMA)
You can use the crossover between these moving averages for entering into a trade. When the 50-day SMA crosses the 200-day SMA, it is a bullish entry signal with a possible uptrend in the market or stock. Here you can enter with a long trade position.
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Relative Strength Index (RSI)
RSI is another momentum-based oscillator that measures the speed and change of price movement. RSI indicator oscillates between range of 0 – 100. When the value falls below 30, it indicates that the price has entered into an oversold condition. An oversold condition is one that the stock has fallen sharply and is expected to bounce back.
When the indicator line crosses above 70, it indicates that the stock is trading in an overbought zone. It indicates that there are growing chances of pullback and an investor should book some profit or enter into a short-selling position.
Stocks can trade and remain in over bough or oversold conditions for longer than market expectations till the irrational exuberance continues in market.
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Bollinger Bands
Bollinger Bands (BB) follows the price movement of stock and uses the standard deviation to tell the volatility of the stock. There are three bands showing the support and resistance with the range of volatility of the stock. When the Bollinger Bands start to movie away from each other, it signifies volatility in underlying security during that period.
But when the bands contract or move closer, it signifies low volatility in underlying.
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Moving Average Convergence Divergence (MACD)
MACD is another widely used technical indicator that you can use for making entry in the market. The indicator shows the relationship between two EMAs of a stock price. The indicator has two lines as well as histogram.
- The MACD line
- Signal line
When the MACD line crosses the signal line to the downside, it is seen as a bearish signal. On the contrary, when the MACD line crosses above the signal line, it indicates upward momentum it is a bullish signal. You can enter into the trade, when the MACD line crosses above the signal line and it would be better if this crossover is accompanied by the positive histogram value.
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Supertrend Indicator
SuperTrend is another indicator in the TradingView that traders use to identify the entry points in the stock or market. The main advantages of SuperTrend are as per the market volatility, it can adjust the dynamic support and resistance levels.
When the stock price or market index is above the SuperTrend line, giving the bullish signal to enter into the trade. On the other hand, when the price is below the SuperTrend line it gives a bearish entry. You can use the different time frame chart patterns to draw the Super Trend line. If there is a pullback that touches SuperTrend without crossing it, indicating the potential of entering into a buy position with the indication of trend continuation.
5 Best Exit Indicators in TradingView:
1.Moving Average Crossover
When the 50-day (short term MA) crosses below the 200-day (longer-term MA), it indicates signal of exit point with the potential of trend reversal.
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Relative Strength Index (RSI)
Between the 0 to 100 range, when RSI is above the 70 levels, it shows the price is trading in the overbought zone suggesting to exit from your trade position.
RSI measures the speed and change of price movement and as per the movement, it oscillates between the 0 and 100 levels. Usually, when RSI enters below 30 levels, buying starts and it can turn back above this level. Similarly, when RSI reaches above 70 the selling starts due to overbought levels of the stock, and it can move back below this level.
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Bollinger Bands for Exiting
You can also use the Bollinger Bands to know the exciting positions in the stock price movement. This band contains of upper and lower bands signifying the two standard deviations from the average. As per the volatility in the price, the band contracts and expands to touch the upper or lower band showing the overbought and oversold zone.
When the price touches or reaches the upper band, it is simply indicating to exit from your trade position. As the asset is likely to fall down or return back, hence you need to close your position, book the profit and exit from the trade position.
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Fibonacci Retracement
Fibonacci concept is somewhat technical concept but at same time is a proven concept that works on tradable securities. On applying Fibonacci Retracement in TradingView, you can see the multiple horizontal lines with ratios written on them (0.5, 0.78, 0.68), representing different support and resistance levels. On the other hand, when the price breaks through the retracement levels, it means the continuation of the trend.
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Custom Volatility Breakout
When the market is highly volatile, it becomes difficult to trade, as you cannot make the right decision to decide when to enter or exit into the trade positions. Here in such volatile market conditions, you can use the custom Volatility Breakout indicator that will help you to identify the potential exit points based on the changes in the volatility in the market.
And while measuring the volatility you can customize this indicator as per your desired period. Whenever the volatility in the market increases, the price becomes highly vulnerable to a trend reversal, giving the signal of a potential exit point.
