Understanding Trigger Points in Trading

What Are Trigger Points?

• Helpful for managing trades and determining exits.
• A hybrid model combining procedural analysis and technical analysis.
• Procedural analysis: The method in which you trade.
• Technical analysis: Derivative methods used for entries and exits.
• Considered a step above standard procedural/technical analysis.
• Ultimate trading form, mixing advanced theories and practices.

Managing Trades Using Trigger Points

Initial Examples and Trends

• Focused on short trades and local trends.
• Example of a trend lasting from May 7th to May 23rd.
• Differentiation between interior trends (shorter time frames) and exterior trends (longer time frames).
• Establishing levels and ranges to understand local and broader trends.
• Importance of time frames: Different trends can appear on hourly, four-hour, or even minute charts.
• Analysis example: Bitcoin’s downward trends.

Detailed Steps and Ranges

• Establish key horizontal levels that have been tested or untested to identify potential exit points.
• Definition of ranges/layers within the movement (e.g., bottom untested ranges, high time frame legacy targets).
• Use multiple time frames to pinpoint key levels.
• Profit Cap: Max expected range, used to establish limits (e.g., previous example with a 10% profit cap).
• Identification of three profit caps/scenarios:
  • Range 1: Immediate (e.g., 2% profit)
  • Range 2: Intermediate (e.g., 4% profit)
  • Range 3: Extended (e.g., 10% profit)

Explanation Through a Trading Scenario

• Use recent trend data to set initial trades (e.g., identification of hold levels).
• Identify trigger points on both the chart and levels/trends.
  • Target-Triggers: Profit-oriented, e.g., taking profit at a 3.75% mark.
  • Trend-Triggers: Exit if specific trends (e.g., a supporting trendline) are broken.
• Use of combined technical (e.g., levels, trends) and procedural (e.g., profit caps) analysis to manage trades.
• Scenario comparisons: Exiting at various points based on target-trigger and trend-trigger logic.
  • Scenario 1: Reaching target and exiting.
  • Scenario 2: Holding until trend is broken.

Concept of Hybrid Analysis

• Trigger points blend procedural and technical methods.
• Mechanical aspect: Procedural decisions based on technical layouts.
• Aim: Maximize returns by strategically managing entry and exit points.
• Trigger options: Points where technical setups align with procedural decisions to either enter or exit.

Practical Examples

• Back-testing different levels and trends to validate trigger points.
• Importance of re-evaluating levels based on ongoing price action.
• Detailed chart work: Marking hold levels, potential targets, and understanding balances in trading.

Summary

• Trigger points crucial in advanced trading setups to blend analysis methods.
• Establish clear levels, ranges, and trends to understand market dynamics.
• Utilize both profit and trend-oriented triggers for effective trade management.