An entry states when risk may be considered. Invalidation states when the original setup is wrong. Using one convenient price for both jobs can hide how much room the thesis really needs.
Research, catalysts, and chart structure organize the trade plan, but they are context rather than the source of Anemoi’s directional flag.
Anemoi takes the price-first route: its proprietary algorithm applies Trigger Levels and the Price Velocity indicator to flag buy-or-sell conditions in AP Terminal, while Crosses provide supporting confirmation and context.
The purpose is to organize observable price behavior around the planned entry area, failure condition, and controlling timeframe. Persistent movement may be consistent with demand or supply, but it does not establish who is trading or why.
The flag cannot identify a particular fund or prove its intent; it is decision-support information, not a personalized recommendation, order instruction, prediction, or promise of performance.
Short answer: Define the thesis first, then mark the evidence that makes it timely and the different evidence that proves it wrong. Position size should follow from the invalidation distance, not force the invalidation to fit a preferred size.
Start with a falsifiable thesis
“The stock will go up” cannot identify failure. A useful thesis names the expected driver, holding period, and observable behavior. For example, a trader may expect a sector leader to hold a prior decision area during an earnings revision cycle. The setup fails if the named area and behavior no longer support that view.
Fundamental or macro evidence can also invalidate a thesis, but it may arrive on a different schedule from price. State which type of evidence has authority and when it will be reviewed.
Separate four nearby prices
| Price | Job | Common error |
|---|---|---|
| Awareness | Begin review before the setup becomes urgent. | Placing the first alert at the desired entry. |
| Entry | Permit risk after the written confirmation. | Entering because the alert fired. |
| Invalidation | Show that the setup or thesis no longer holds. | Choosing a tight level only to increase size. |
| Broker trigger | Activate a selected order under broker rules. | Assuming the trigger is the final fill price. |
Let risk follow the honest distance
Once entry and invalidation are defined, their distance becomes an input to position sizing. If the result exceeds the account or portfolio limit, reduce size or reject the setup. Do not move the failure point to make the arithmetic attractive.
Gap risk remains. A stop order can fill at a materially different price in a fast market. A limit can control price but may not execute. The plan should describe what happens if price moves through the entire area before an order can be reviewed.
Write the decision before the market tests it
- The instrument and holding period are eligible for the strategy.
- The thesis names the expected driver and controlling timeframe.
- The entry condition uses observable, reproducible evidence.
- The invalidation belongs to the thesis, not to a desired share count.
- Scheduled events and possible gaps are recorded.
- The order type and no-fill response are understood.
Bottom line: A good plan does not search for a perfect entry. It links a specific confirmation to a separate failure condition and accepts only the position size that the real distance permits.
Sources and review notes
Important: This page is for general educational purposes only. It is not investment advice or a recommendation to buy, sell, or hold any security. Trading and investing involve risk, including possible loss of principal.