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A predetermined plan for when and how to close a position.
Why It Matters
An exit strategy removes emotion from trading. Before you enter, know exactly when you'll take profit and when you'll cut losses. Without a plan, you'll hold losers hoping they recover and sell winners too early. The best traders are disciplined about exits.
Key Points
- Set profit targets: 'I'll sell half at 50% gain, rest at 100% or trailing stop'
- Set stop losses: 'I'll exit if position loses 30%' - and actually do it
- Time-based exits: 'I'll close 3 days before expiration regardless of P/L'
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Common Questions
A predetermined plan for when and how to close a position. An exit strategy removes emotion from trading. Before you enter, know exactly when you'll take profit and when you'll cut losses.
An exit strategy removes emotion from trading. Before you enter, know exactly when you'll take profit and when you'll cut losses. Without a plan, you'll hold losers hoping they recover and sell winners too early. The best traders are disciplined about exits.
Set profit targets: 'I'll sell half at 50% gain, rest at 100% or trailing stop'
Set stop losses: 'I'll exit if position loses 30%' - and actually do it
Time-based exits: 'I'll close 3 days before expiration regardless of P/L'