Exit
The price at which you close a position, whether at a profit or a loss.
Also called: close a position · exit price
In plain language
Every trade has two decisions, and the exit is the one that determines the result. An entry only creates exposure; the exit converts it into a number.
Exits come in three flavors: the stop loss, which ends the trade when the idea is wrong; the take profit, which ends it when the idea has worked; and the discretionary exit, when conditions change.
Both exits should exist before the position does. Deciding where to get out while you are already losing money is the worst possible time to decide anything.
Why it matters
Traders spend most of their effort on entries, but exits are where the distribution of outcomes is actually shaped. Two people can take the same entry and end the year in opposite places.
Common mistakes
- Letting a planned exit drift because the position is "almost" back to break-even.
- Taking profits early on winners while giving losers unlimited room.
- Having no exit plan for the case where the trade goes nowhere for weeks.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
The price at which you open a position.
A predefined exit that closes a losing trade before the loss becomes serious.
A predefined price where a winning trade is closed automatically.
A stop loss that follows price in your favor and never moves back against you.
A trade’s result expressed as a multiple of the amount you originally risked.