The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

THE HAnDbook of TECHniCAl AnAlysis

referring to the medium‐ and long‐term charts for technically significant price

levels and trend identification.

Short‐term traders may also look for:

■ (^) Technical levels whereby potentially lower‐risk additions may be made to ex-
isting positions, such as buying at significant support levels and shorting at
resistance, instead of trading breakouts which is less cost-effective
■ (^) Technical levels whereby a reduction in positions may be made, in a defensive
move, such as scaling out of some or all positions at the break of any signifi-
cant support
■ (^) Technical levels whereby shorting is advantageous, especially at the break of
any significant support

26.4 The Seven Participatory Options

There are seven participatory options available to any market participant,

namely:

1. To enter (i.e., to initiate) a new position


2. To add to (i.e., to scale into) a position


3. To reduce the size of (i.e., to scale out of) a position


4. To exit (i.e., to fully scale out of) a position


5. To re‐enter a position in the same or opposite direction


6. To fully or partially hedge a position (i.e., to neutralize or diminish directional
   risk)


7. To remain in cash (i.e., to refrain from holding any positions)

It must be noted that the execution of all participatory options listed above,

with the exception of being in cash, should be based on the penetration or vio-

lation of a price trigger on the traded instrument or stock, and not merely on a

signal.

26.5 Triggers, Signals, Price Targets, and Stoplosses

26.5.1 triggers

A trigger is an event that causes a trade to be initiated, which for most practi-

cal purposes is simply an entry filter at work. Triggers can be classified as either

price based or non‐price based. Price based triggers are regarded as the most

reliable type of trigger, and are most commonly used by traders, since price is

the best indicator of directional change. Non‐price based triggers are also some-

times employed, especially by robotic or automated trading programs, where

entries and exits are executed when a specific trading condition is met, which

may or may not be directly related to the penetration of some significant price

level or overlay barrier.