In many ways, trading is an art. There is a beauty in identifying, planning and executing a trade. That being said, I am going to teach you how I became a Van Gogh of the stock market.

In my opinion, a good entry takes away a lot of the stress that trading will encounter. For example, how to manage a loss, where to set a stop, and how to start off the trade with gains for a much better experience. Do you know how much easier life is when your trade makes money right out the gate? For me, decisions are much easier to make when I have a profitable cushion provided by the market, or I have insured an easy to manage loss that I am comfortable with. These things are all possible with a good entry.

A few days ago, I taught you how I trade breakouts. The strategy I am going to discuss is different; this is how I trade trending stocks.

There are a few simple rules I like to follow, and these are the rules I have taught day in and day out since I started trading, and since I started this blog. In fact, I know many of you have already adopted these rules and use them successfully. Let's start with the first step.

1.) Find a great trend.

This is a very important prerequisite. The strength of the trend will dictate how successful the outcome. Don't settle for a trade that won't make you any money. I see many traders fail to find stocks that will make strong moves, or that will move, period. I have mentioned "momentum" stocks recently and selecting a stock that is going to move is a huge part of my process. You've all seen the stocks I trade, so I won't go into any further detail.

Rule of thumb: As a minimum requirement, I look for stocks that move at least 10% from low to high.

2.) Buy the Dip / Sell the Rally

To many, this approach seems very uncomfortable... Buying a stock that is going down, or shorting a stock that is going up. However, this can be a very effective entry signal in a strong trend.

Think of each stocks movement as a "breath." A stock will breathe in, and then breathe out. Here is a diagram to help illustrate.

Points 1, 3, and 5 are where the stock inhales before moving higher. After a big move, the stock must exhale ( 2, 4 and 6) before moving higher again.

Buy the exhale.

Doing this is an anticipatory strategy and like everything else, it isn't 100% profitable. However, if used properly, can be 100% effective. While this strategy can help you get into a trade at the earliest point possible, it can also help you to manage losses. Personally, I like my losses quick, small and easy. Out of every approach I've traded, I have been able to produce quick, small and easy losses with this method. Here is how...

Take a look at former Option Addict favorite, SYNA

I have highlighted all the trade entries I have discussed over the last 6 months via my watchlists. You'll notice that these are the same points I illustrated on the trend diagram. These are the dips you are attempting to buy. When used with a simple trend line acting as support, you are trying to pick and anticipate the point in which the stock will stop going down and start to rise again.

Note, this strategy will not work forever. At some point the trend will cease to exist. Using this strategy will help you identify exactly when that will occur. In fact, SYNA recently gave up on its trend. Take a closer look:

I have highlighted the point that identifies the trend failure. It is the first close below support. Had you bought the dip during the first week of December, you'll notice that the closing price of the day I highlighted was still above the closing price on the day the trade was taken. It is possible that you might have walked away with a profit here as opposed to a loss (which won't always be the case).

3.) Enter at Your Exit

When you decide to enter the trade, enter as close to your exit point as possible. If a close below support is where you would exit a trade; buy at support. The further away a trade is from your exit, the more risk you will assume in the trade.

This example shows how taking a trade far away from support can leave you with excessive risk. I highlighted an entry at $56 with support close to $51. First off, this means you have missed a $5 point move already (10%). I hate to see a late entry like this, and never trade like this. Never. Aside from the missed opportunity, you have to let the stock go back to support. As long as the stock remains above support, the uptrend is in tact. You'll commonly hear me say this, but if you ever exit a trade like this with the stock above support...this is what I call "committing trading suicide."

If support is much lower than the price that you've entered, this will help you determine risk. If I bought at $56, and support is at $51...I am risking $5. If I am risking $5, it better be to make $10 - $15. If not... what the hell is the matter with you?

4.) Be Disciplined; Follow the Plan

Let the trade play out, and follow the plan. If you didn't have a plan prior to taking the trade...you deserve the outcome.

This approach is very simple, yet effective. As you can see, the approach I take is a pure observation of price action and does not require the use of another price observing tool. There is going to be plenty of discretion as to which stocks you trade, which entries you refuse, etc. This is where the use of volume analysis can help to confirm your analysis, or the study of daily price ranges can help find shifts of power between buyers and sellers during "inhales and exhales."