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1998issue C021-6

Exit stops before entries

Once a position is open, market risk is already on. A complete exit plan bounds a losing trade with a standing money-management stop, trails favorable price to lock part of the open profit, and writes every leave as an explicit rule.

  • Write the exit plan before the position exists, because market risk is already on once the trade is open.
  • Keep a money-management stop in force for the life of the trade at a stated adverse-excursion amount or price offset from entry.
  • Move a trailing stop with favorable price so a reversal locks part of the open profit instead of returning the full original risk.
  • Use several exit types at once and write them as reusable rules across markets, time frames, and entry systems.
Entries in this reading3 entries
Current trackTrailing exit18 readingsTrailing stop87 readingsStop-loss order144 readings

Bound the loss while risk is on

Once a position is open, market risk is already on, so an exit plan has to bound a losing trade instead of waiting for a later opportunity to get out.

A complete exit plan coordinates a loss-control stop with profit-taking tools such as trailing stops, targets, and time- or volatility-triggered market orders.

Keep a money-management stop for the life of the trade

A money-management stop stays in place for the life of the trade and exits at a stated adverse-excursion amount or price offset from entry. That standing Stop-loss order is the bound on adverse excursion for as long as the position is open.

Stop distance can be set from a fixed dollar risk, from volatility so the trade has more room in wild markets, or from a nearby price barrier that also acts as a critical-threshold exit.

Trail favorable price instead of giving the original risk back

A Trailing stop is moved with favorable price so that a reversal closes the trade with part of the open profit locked rather than giving the full original risk back.

Tightening a protective stop improves loss control but can cut many winners short. Some entries leave enough room that a closer stop still keeps a workable win rate.

Use several exits as one written procedure

Using several exit types at once is the stated default: a catastrophe or money-management stop, a trailing stop once the trade is working, and a risk- or volatility-based exit before a stop is hit.

The same exit principles apply across markets and time frames, and exit modules can be written as explicit rules and reused across different entry systems. In this editorial reading, those reusable leave rules are the Trailing exit: the holding period stays one written procedure rather than a later improvisation.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
7 of 18 in the Trailing exit track
19981-7 pp.Next on Trailing exitExit rules evaluated with a fixed random entryA complete exit procedure coordinates several exit types so losses stay bounded while winning trades are not cut off before they can develop.
All readings on this track · 18 readings
  1. 1988Constructing a mechanical trend system with independent trailing exits
  2. 1991Write a staged RSI exit book with trailing stops
  3. 1993Evaluating filter-trigger trailing exits after breakouts
  4. 1995Weekly-close breakout entry and trailing exit in Eurodollars
  5. 1996Evaluating moving-average turn entries and slope exits
  6. 1997Precommit an equity-risk cap and a profit-retracement exit
  7. 1998Exit stops before entries
  8. 1998Exit rules evaluated with a fixed random entry
  9. 2002Construct the stay-or-flatten decision before entry
  10. 2006Audit the stop, trail, and risk-reward stack as one procedure
  11. 2007Building a momentum system with relative strength and trailing exits
  12. 2013When buy and hold needs a sell rule
  13. 2013A mechanical trend toolkit that turns screens into one entry-exit procedure
  14. 2014Is a two-period relative strength index, a channel breakout, and a trailing exit one long-only procedure?
  15. 2016Trend-aligned option entries and trailing exits
  16. 2017Monthly three-black candles as a trailing exit
  17. 2018Evaluating profit-taking and reentry in trend following
  18. 2020Treat the zigzag threshold as a volatility-scaled construction variable
By fieldStops and loss limits40 readingsBy year199853 readings
All 18 readings tagged Trailing exit
Also on Trailing exit5 readings
1997Precommit an equity-risk cap and a profit-retracement exit1998Exit rules evaluated with a fixed random entry2002Construct the stay-or-flatten decision before entry2006Audit the stop, trail, and risk-reward stack as one procedure1988Constructing a mechanical trend system with independent trailing exits