THE HAnDbook of TECHniCAl AnAlysisFor all practical purposes, the phrase risk seeking may be used interchange-
ably with aggressive and the phrase risk averse may similarly be used interchange-
ably with conservative.
Therefore a trader or client may be risk seeking or aggressive with respect to
the time of entry by not requiring any price confirmation of the expected move
prior to entry. A trader or client may also be risk seeking or aggressive with respect
to the price on entry by entering the market at a less‐favorable price.
Refer to Figure 26.1. Let us assume that we intend to initiate a long position.
We see price approaching the downtrend line AB from below.
If we bought into the market at Point 1 at $100, we have committed risk
capital to the market before confirming whether price was able to penetrate the
downtrend line AB. We say that our time of entry is aggressive, since we entered
the market before the confirmation of a breakout. On the other hand, we would
have bought into the market at a much cheaper price, making it less of a risk. We
therefore say that we are conservative with respect to the price on entry. As you
can see, the participant is both aggressive and conservative at the same time, with
respect to time and price.
If we bought into the market at Point 2 instead, we say that we are conservative
with respect to the time of entry, since we already have confirmation of the upside
breakout, which represents less of a risk. One thing we need to remember is that
confirmation is not a guarantee that price will continue to traverse in the expected
direction of the breakout or reversal. It is merely proof that price has the ability to
penetrate a certain technical barrier. At Point 2, we also say that we are aggressive
with respect to the price on entry, as we are buying it at a higher price, which is
less advantageous and represents a higher risk to a trading account.
Finally, if we had decided to buy in at Point 3, we would say that we were aggres-
sive with respect to the time of entry as the market has not proven that it was capable
of rebounding off the downtrend line AB. The pullback at Point 3 was not as yet con-
firmed by price action. We would also say that we were conservative with respect to
the price on entry as we bought in at a lower price, resulting in a lower risk exposure.
Figure 26.1 Risk Profile for Long Entries.