Let’s say you see a firm signal on your intermediate timeframe and you are to decide to enter the market. Will you place a limit order? Or a stop entry? What would be the trigger price? Let me go through the option that I have in mind when I am about to enter the market.
The first and most obvious way to enter a position it to place a stop order a few pips beyond the signal bar in the direction of the signal. This is the most aggressive method one can use in my opinion however this the easiest that can get tricked by the market. Also when you decide to place a stop entry it leads to the question, how far you have to put the trigger level so your order will not get activated by a false movement. In my experience 2-3 pips is not a safe distance which cannot get triggered by institutional trader who are gunning for stops.
2. Use prior high/low for entry level
It is similar technique but more conservative as it waits that the price undercuts the previous swing point. It lets some pips slip away but also lets the market to gain some momentum in the trades direction.
3. Hook entry
This method comes from Joe Ross and requires quite some patience as the main point is to wait for a the first failure of a price-bar to make a higher high or a lower low in the trades direction. The the previous bar’s extreme point would be the entry trigger. Again, this method has more slippage but lowers the number of false entries.
4. 50% signal bar entry
This method provides the best entry price but may not get you in the position as the price often doesn’t pull back but takes off and never looks back. (Of course with ‘never’ I mean the reasonable timeframe of the trade.) It operates with a limit order placed at the half of the signal bar’s range therefore it reduces the number of pips that are risked. The downside of this method is that it often gives a premature entry when a stop order outside of the signal bar’s range would have not get triggered.
Which method to use is the trader’s own discretion and judgment. Of course one can always tell which should have been used after the trade was done… but traders have to make decision at the “hard right edge” of the chart.