How do you identify entry and exit points using charts?

Finding Entry & Exit Points with Charts Technical analysis helps traders spot entry and exit points. Focus on trend analysis – uptrend, downtrend, sideways trend. Draw trend lines and channels to connect highs and lows. Trend lines act as support/resistance. Enter long at support in uptrend, short at resistance in downtrend. Exit when price breaks trend line or channel for trend reversal. Charts reveal market psychology and guide strategic decisions.

Although in some cases, a break out of the channel could mean a start of a new move, with the edges of the channel acting as support and resistance boundaries. It is key to allow the price action to confirm the move before entering a position, as sometimes you can encounter what is called a "fake-out", which is when the price breaks through a trend or a channel but then quickly reverses the move and continues along the original movement.

Understand this without distraction. When we say entry and exit points on chart, it actually means taking entries on all possible backtested setups that come under our risk capabilities. From those entries, not all will work. Some will fail and that is not a person’s fault. Markets are supreme. Market trends are actually hard to figure out because not every day market will be trending, most of the times it will be sideways. Find out the trend using trend lines, channels, supports, resistances, etc. Work on them, backtest them and take every possible calculated opportunity to enter.

There are multiple ways to formulate entry and exit rules. Only condition is make your own rule and follow it consistently. It could be chart patterns, candlestick pattern, some MA crossovers and what not. Just analyse past winners and try to come out with some pattern stocks are making before breaking out. Make rules around it and follow it blindly.

In a trend, for better risk/reward I prefer to enter after a correction. For example, in an uptrend, I’ll wait for a correction to a support level rather than entering during a breakout of a resistance level. Another great timing for entry, is if you notice a fake breakout (against the trend). Just wait patiently after it ends and the price goes back to the relevant level. Now the stop loss will be easy to define and usually will be “cheap”.

Evolve. We should place this word in our heart and mind both. Markets are evolving day by day. For eg: 20 years ago, there was a pattern named double top. When that was figured out on chart after an uptrend at the top, 100% market would fall for a retracement or a down trend. 10 years ago, traps came in. Not every double top worked as it used to be. Meaning? Market evolved and changed the double top. Nowadays, first an uptrend, then a double top, then a slight retracement, then sideways, then again uptrend! Meaning? Market evolved like crazy. So, now double top is traded differently than it used to 20 years ago. So, backtest the conventional chart patterns that are evolved now so that we can know how the new version of patterns work.

In my experience, technical indicators can mislead if the trader doesn’t really know how to use them properly. Since it’s all an underlying or a derivative of the chart, I prefer to analyze the cleanest (Japanese candle) chart possible. It gives better perspective of the real situation and “forcing” you to be more professional in technical analysis as well as noticing small but important details.

Indicators are magic when a trader actually knows candles, supports, resistances, trend lines, etc. Most of the indicators need price data to work. For eg: Moving averages. When we apply a simple moving average of 100. It means the average of the last 100 candles formed. So simple moving average of 100 will work when it has the data of past 100 candles. That makes it a secondary indicator. So whats the primary? The price itself! Candles, supports, resistances, trend lines, etc. A trader needs to learn the primary first and then combine the indicators and spread the magic on their trades. An indicator can be considered an extra confirmation but not the primary calculation.