Stuart McPhee and David Jenyns, renowned traders, discuss two crucial aspects of trading, entry points and exit points and options trading.

David: I have a question here: what are the normal entry/exit points that people use?

Stuart: It depends what products we are trading and how we are trading. There are differences in entry for trading for short term and medium term because timing is critical when we’re trading short term. We are really trying to get everything we can out of a few day trend, short term trend, so timing is critical. With my more medium term conservative approach, I do my scanning once a week because timing isn’t as critical as when we get in.

Whether we use indicators or whether we use simple candlestick or daily bar analysis to find entry points – there is theoretically a potentially infinite number of entry signals we can use and different combinations. But it really does boil down to what trading style we are adopting. Then exit points, there are not as many, and really of those that work do we use perhaps just an indicator or two, maybe a reversal signal, or do we use average true range to determine our calculation, a percentage fall, some form of technical excerpt? It’s a very broad question.

The first thing we need to work out for that person is what are we trading, and what sort of trends are we going to identify and from that we can work towards putting some sort of methodology together.

David: I wanted to build on that. We need to understand how everything fits together, and I think just looking at the entry points and exit points on their own and mutually exclusive, you can’t really do that. The whole approach to designing a trading system and matching it to the type of instrument you’re trading links into your risk profile and your own personal circumstances.

It also includes how much time you’ve got, then your entries and your exits and all this interlinks and so it would almost do the listeners a disservice to say, check this out, try that entry just on its own. You really do need the complete system because if you just get a small piece of it it’s not really helpful, because you don’t know how it works with the other things.

Entry points and exit points nevertheless are a crucial element that you must get right within your complete trading system.