Entry and Exit: The Two Halves of a Trade
Entry is the price at which you open a trade and exit is where you close it. Almost all trading education is about the entry, and almost all of the difficulty is in the exit — because an entry is decided once, and an exit has to be decided again on every candle until it happens.
Nearly all trading education is about getting in. Nearly all of the difficulty is in getting out, and the reason is structural rather than psychological.
How it works
A trade has two prices: where you got in, and where you got out. The gap between them, minus costs, is the result.
But they are not equally hard, and it is worth being precise about why.
The entry is a decision you make once, with nothing at stake. You can take as long as you like, and if you do not like it you do nothing — which costs nothing.
The exit is the same decision made again on every candle, with money moving, until it happens. That is the whole asymmetry, and no amount of discipline removes it — it can only be handled by deciding in advance.
Two ways to get in
The entry has order types too, and the choice has a real consequence.
A market order buys at whatever is available now. It always fills, and the price is whatever the price is.
A limit order buys only at your price or better. You get the price you wanted, or you do not get the trade — and the moves that run away without filling you are exactly the ones you wanted.
Certainty of price against certainty of fill. It is the same trade-off as the two stop types on the stop loss page, pointing the other way.
The gap between the two prices
Worth knowing early, because it is invisible on a chart.
Every trade starts slightly negative. There is a spread — a difference between the price to buy and the price to sell — and on many instruments a commission on top. Open a position and close it instantly and you lose that amount.
It is small, and it is charged on every trade. Which means a strategy that takes many small wins is paying it many times, and one that takes few large ones is barely paying it at all. The size of your average move has to be judged against that cost, not on its own.
The three exits
A fixed target
Pick a price before you enter — usually a multiple of your stop distance, so a stop of 1R gives a target at 2R or 3R. The risk management page has the arithmetic.
It is decided when you are calm and it removes the question entirely. The cost is on the chart above: price went further, and you were not there.
A trailing stop
Move the stop up behind price and let the market decide when it is over. You capture the whole move when there is one.
The cost is unavoidable and worth stating plainly: you always give some back. The trade ends when price comes back far enough to hit the stop, so you never exit at the high — by construction.
Some of each
Take part of the position off at a target and trail the rest. It is a compromise rather than a solution — you get a smaller certain result and a smaller share of the big move.
Which is fine. There is no exit that does not pay for one thing with another, and the choice is which regret you would rather have.
A worked example
Before entering, both exits exist: a stop below the swing low, and a target at twice that distance. Neither can be argued with later because neither was chosen later.
Price runs. Nothing to do.
Price stalls and pulls back. Still nothing to do — this is the moment the plan is for.
Price reaches the target. Out.
Price keeps going without you. This is not a mistake. It is the price of the method, paid on this particular trade, and it will be paid back on the one that reverses at your target instead.
The original data
Across our study of 24,971 trading videos, 570 cover entries or exits. The median one gets 8,304 views, 73% never pass 50,000, and the median length is 12.8 minutes.
The corpus carries description text for 105 of those 570, and across those 105, two mention invalidation, failure, or what a bad read looks like.
When it fails
Out too early
The first pullback feels like the end of the move because it is the first time the trade has gone against you. A pullback inside a trend is the normal case, and exiting on it converts a working trade into a small one.
Out too late
The mirror, and it comes from the same place: no plan. Waiting for a better price is a decision made inside the position, which is the one condition under which people decide worst.
No plan at all
This is the common case, not the extreme one. Most people enter with a stop and no target and no trailing rule, which means the exit will be improvised — and it will be improvised at the moment they are least able to.
You found the exit afterwards
Every chart has an obvious best exit once it has finished. At the candle itself, the top and a pause are the same picture — which is exactly why the rule is written before the trade rather than found during it.
Related
Stop loss is one of the two exits, and the page covers the four ways the price gets chosen.
Risk management is where the target comes from, because a target is measured in stop distances rather than in dollars.
And market structure supplies the levels a trailing stop follows, so the stop keeps marking a price where the read would be wrong.
I have said out loud on a stream that I needed to work out when to close a position, while the position was open. That is the honest shape of this: the entry took a minute and the exit was still an open question days later. What I do about it now is decide both before I click - not because I am disciplined, but because I have seen what my judgement is like when there is money moving on the screen, and it is worse.
— Michael Whitman, from this video
This page is educational, not financial advice. Test every idea on your own charts before risking money.