THE HAnDbook of TECHniCAl AnAlysisentry above that level is conservative in time but aggressive in price. But upon ap-
plying the WCS principle, we immediately realize that the longer we refrain from
entering, the greater the probability that price may move adversely with respect to
our intended long entry. Hence, the later the entry, the greater the chance of enter-
ing at a point highly unfavorable in price, where price may in fact be over extended
or exhausted, with the market anticipating a correction. Therefore, overly late
entries may be regarded as both aggressive with respect to the time and price on
entry, in spite of having price confirmation. One way a trader can mitigate this
risk is to enter with a more conservative risk size, thereby rebalancing the entire
risk outlook.
On behavioral profile and stoplosses
For stoplosses, we only refer to profiling risk with respect to risk size. As such, a
large stopsize is better suited to traders who are risk seeking with respect to risk
size on exit, whereas a smaller stopsize is more appropriate for traders who are
more risk averse with respect to risk size.
Example: Refer to Figure 26.11. The following is an exercise in identifying the
various behavioral profiles with respect to long and short entries on the continu-
ous futures contract for Silver. Assume all entries are of equal risk size.
Task: Identify the specific behavior profile for each long and short entry on the
chart, indicated at points 1 to 6.
Answers:
■ (^) Behavior Profile for Long Entries
■ (^) Point (1) is risk seeking with respect to time of entry but risk averse with
respect to price on entry
■ (^) Point (2) is risk averse with respect to time of entry but risk seeking with
respect to price on entry
■ (^) Point (3) is risk seeking with respect to time of entry and risk seeking with
respect to price on entry
Figure 26.10 Risk Profile for Late Long Entries.