Today's Quote: “Motivation is what gets you started. Habit is what keeps you going." - Jim Ryan.

Continuing our talk on “entries” - day three.

Well if the entry is everything, what can we do to improve our entries? Here is one thought. Let’s make sure we have solid entries that don’t stop out often. Let’s make sure plays go a few cents beyond triggering and put the trigger (point of entry) far enough away from the stop so it is hard to stop out. If few plays stop out, we have to make money, right?

Here is another idea. Let’s zoom down and find a very very narrow area of entry. An area so focused the stop becomes very tight and the reward-to-risk becomes huge. With a huge reward-to-risk working for us, we have to make money, right?

Wait a minute. Those two statements are opposite statements. Which is correct or better? Both are. Or neither. You see, sometimes when teaching it is helpful to simply expose the dilemmas. It takes some traders months to realize this is a trade-off that does not have a perfect answer. But by bringing it front and center and discussing the various ideas, it removes it from that long list of unknown concepts traders mull over.

For those of you that understand the above dilemma, it is simply a battle of maintaining a high Sharpe ratio at the expense of a low batting average, or a nice batting average at the expense of a low Sharpe ratio. It is easy to do either one at the expense of the other. The trick is to do one with MINIMAL expense to the other. We will get into this more tomorrow.