Entry, stop and target

After we have drawn a good, fresh zone, we wait for price to return to it to build the trade on three pillars: an entry point, a stop-loss point, and a profit target.

The three pillars

• The entry — when price touches the zone’s proximal edge. It is wise to wait for a confirmation signal from the candles (such as an engulfing or a hammer) before entering, rather than a blind entry on the mere touch.
• The stop — a little behind the distal edge (the line of defence); if price reaches it, the zone’s premise has been invalidated, and there is no point in staying.
• The target — at the nearest opposing zone: the target of a buy is a supply zone above it, and the target of a sell is a demand zone below it.