Margin of Safety (MoS)…
… wasn’t that in investing?
Well – surprise – it’s in trading too.
You can enter a trade with MoS.
ID the trend.
Wait for a minor reversal.
Let the reversal continue towards a pivot, or a support or a what have you.
During this reversal, whenever you feel that you have considerable MoS, well – enter.
Why shouldn’t you wait for the pivot to get touched?
Things happen real fast at a pivot. Upon a pivot-touch, you can lose your comfort-zone even within minutes.
Two vital things can happen at a pivot.
Either there’s a quick bounce-back, or the pivot gets broken.
Bounce-back means your trade is now in the money, and that you can go about managing your trade as per your trade-management rules. Wonderful.
Pivot-break is not a worry for you.
Because you’ve placed your stop slightly below pivot, after the noise.
Upon pivot-break, you get stopped out. You take the small hit and move on to your next trade.
Eventually, things heat up.
There is movement.
Tops get taken out.
Fast money can be made.
How do you enter here? (Needless to say, for shorts, everything is to be understood reversed).
Momentum play (MP)…
… is the weapon of choice.
You set up a trigger entry after a top or a resistance or a what have you, and wait for price to pierce, and for your entry to get triggered. Then you place your stop, below top or resistance or what have you.
MP vs MoS is a matter of style.
If you’re not comfortable changing your trading style to adapt to times, that’s fine too. Stick to one style.
If you’re conservative, stick to MoS.
In a frenzy, however, MoS might almost never happen.
In a frenzy, entry will be triggered exclusively through MP.
Take your pick. Adapt. Do both. Or don’t. Do one.
You call the shots.
This is about you.