Entry Criteria in a
Trading Plan
Learn what entry criteria are in a trading plan, why they're defined in advance, and how they support structured decision-making.
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Entry criteria are the specific, pre-defined conditions that must be met before a trader opens a new position. This guide explains why entry criteria are a core part of a trading plan and how they're generally structured.
This is general educational content explaining a common planning concept, not specific guidance on what any individual's entry criteria should be.
What Are Entry Criteria?
Entry criteria are the specific conditions β defined in advance, before any particular trade opportunity arises β that a trader requires to be met before opening a position. These criteria are intended to remove ambiguity and impulse from the decision of when to enter a trade.
Why Entry Criteria Are Defined in Advance
Deciding entry criteria in advance, rather than in the moment, is intended to reduce the influence of emotion or impulse on trading decisions. When a specific opportunity arises, having pre-defined criteria allows a trader to assess it objectively against a standard set in a calmer, more considered state, rather than making a decision under the pressure of a live market moment.
What Entry Criteria Might Include
Entry criteria can draw on many of the concepts covered elsewhere in this Learning Hub, such as specific chart patterns or indicator conditions (covered in the Technical Analysis module), fundamental factors (covered in this module's Fundamental Analysis unit), or a combination of both. The specific content of entry criteria varies significantly between individual traders and approaches, and this lesson does not endorse any particular set of criteria.
Consistency in Applying Entry Criteria
A key aspect of using entry criteria effectively is applying them consistently, rather than only following them when convenient or ignoring them when a trade "feels" right despite not meeting the defined conditions. Consistency is often considered more valuable to the overall structure of a trading plan than the specific content of the criteria themselves.
π Summary
Entry criteria are pre-defined conditions that must be met before opening a position, designed to reduce the influence of emotion or impulse on trading decisions. Consistently applying entry criteria, rather than deviating from them situationally, is a key part of using them effectively within a broader trading plan.
Frequently Asked Questions
What should my entry criteria be?
This depends on individual approach and preferences; this lesson explains the concept generally and does not recommend specific criteria.
Why is it important to define entry criteria in advance?
Defining criteria in advance helps reduce the influence of emotion or impulse when a specific trading opportunity arises.
Can entry criteria be based on technical analysis?
Yes, many traders base entry criteria on technical analysis concepts, fundamental factors, or a combination, depending on their overall approach.
What happens if a trade doesn't meet my entry criteria?
Under a structured trading plan, a trade that doesn't meet defined entry criteria is generally not taken, regardless of how appealing it might otherwise seem.
Risk Warning
Trading forex and CFDs involves significant risk and may not be suitable for all investors. You may lose all of your invested capital. Please ensure you fully understand the risks before trading.
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