Entry point refers to the price at which a trader [sold] or [bought] a financial [instrument] and therefore entered a trade.
For a trader to profit, they must enter and exit their positions at the most profitable price points. Traders will commonly undertake [fundamental analysis] to determine if they view an asset as undervalued or overvalued in the marketplace. They will then, tend to use [technical analysis] to determine the most likely pricing directions, given the asset’s current value and market conditions, based on historical data.
Once they have concluded on the direction that they believe the price will go, the trader can then set entry and exit points. For example, if they conclude that gold, at $1,685.60 is undervalued by the market, and their technical analysis leads them to believe that should the price rise toward $1,690.00, it will gain momentum and continue upward towards $1,700.00 and perhaps beyond. The trader may set $1,690.00 as their entry point.
For a trader to accurately predict when the market’s turning points are at play, they must possess a strong understanding of the influence of supply and demand within that market, along with strong technical analysis skills.
While the above example is a common approach, there are multiple strategies that a trader may employ, as it is highly unlikely that the accurate entry point can be determined with the use of a single strategy.
Key takeaways
- The entry point refers to the price at which a trader buys or sells an instrument on the market
- The point of entry is determined by assessing an instrument’s value and predicted future price action
- There are a range of technical analysis techniques that can be applied to aid in identifying the most suitable entry point