This document discusses the importance of having an exit strategy when trading. It notes that while traders focus on finding good entry opportunities, most overlook how to exit trades and take profits. Without knowing when and where to exit, traders can face large losses or watch profits evaporate. The document advocates having preset stop losses to limit risk on each trade to a fixed percentage of one's account balance. It also suggests taking some profits on trades as they rise to lock in gains while still letting part of the position run for larger profits. Consistently applying an exit strategy with targets for losses and partial profit-taking can help traders avoid emotional decisions and increase long-term gains.

2. When talking about trading, the
conversations usually revolve around
trading setups. After all, people want
to find the trading oppportunity, enter
the trade and reap huge rewards.

3. In order to reap any reward when
trading, there is one key element that
gets over looked by many and that is
how are you going to take your trading
profit.

4. That should be obvious but I have seen
many times where people are in a trade
and have no idea when or where they
should exit.
This poses dangers such as:
a large loss
evaporating profits

5. Hopefully you are well versed on the
topic of risk in trading as it pertains to
your trading account. When you enter
a trade the possibility of it going
against you is always there whether it
is to retrace some of the profits or put
you in a negative position.

6. If you have not taken the time to learn
about position sizing, the move against
you that puts you in the negative can
be enough to trigger a margin call.

7. For me and so many other traders, the stop
placement defines the position size.
Here’s an example using Forex as the
trading instrument.
Account Balance – $10000
Risk per trade – 1%
Dollar risk per trade – $100

8. Now I know that whatever “setup”
occurs, my maximum risk on any one
trade is $100 which simply means: my
allowable loss is $100.
My trading profit though is variable
and is dependent on the conditions of
the market AND my exit strategy.

9. Let’s say that my setup is simply a pullback
to support zone. This particular zone is 25
pips plus 5 pips wiggle room making 30
pips the stop on this trade.
I use this zone bottom because if it is
violated, my premise for the trade is not
valid.

10. A quick calculation shows I can trade
$3 per pip (3 mini lots) when placing
my stop in a location that would show
me that the entry was a little early.
Now I have my setup and know exactly
where I will exit to protect my trading
account from taking a beating if I am
wrong.

11. POINT: A stop order sits in the market like a limit
order however once triggered, it acts
like a market order where you get filled at the
best possible price which can mean slippage.

12. Forex is a market that is easy to dial in
position sizing because of the various
lot sizes available at many brokers.
Almost no trade is off limits due to
stop size however you may want to
consider what type of trade you are
taking.

13. As a rule of thumb, swing/position
trading will have a smaller stop than a
scalping type of trading.

14. In my example I took an even more
conservative position size (less than
1%) by only risking $90 because I
rounded down.

15. If I am prepared to lose $90, should I
not aim to make at least that amount
in a trade? How would I go about
giving myself a chance to make at least
as much as I have risked?

16. This is where your “in profit” exit
comes into play.This is where things
get a little tricky. I want to limit my loss
so I have a hard target for an account
protecting exit.

17. BUT
I want to make as much money as I can
on the trade. Does it make sense to
have a hard target for profit taking?
Would I not be cutting a trade short?

18. Picture this
You are riding a trade high and with
your initial risk of $90, your trade is up
$270. Adverse news comes out and
your profit has dropped to $180. $90
has simply evaporated from your
screen

19. Your emotions take over and you sit on
the trade waiting for the market to rise
again. But it keeps on dropping.

20. More people bail on their longs driving
the price further against you and
finally, you take the exit at +$90.

21. 1. Wash.
2. Rinse.
3. Repeat.
This is the course many people
take with their trading!

22. Ask yourself if you are able to be
objective and exit your trade during an
adverse reaction. Most can’t and that
is where hard targets for your profits
come into play.

23. Targets may not always be hit but if
you have an exit plan during the
negative parts of the trade, you can
still gain a profit.

24. So if we agree we would like to make
more than we will lose, what is the
best way to go about it?

25. Some will argue that scaling out takes
the emotion of the equation because
you’ve banked some profits and
lessened the remaining risk. You can
then leave the trade running while
trailing your stop for bigger gains.

26. Others will say that scaling out is
pointless because a loss early on in the
trade would usually be a full position
loss. Your profits though will not be on
the full position size because you took
out partial.

27. They are both right and all the matters
is what you are comfortable with and
will do on a consistent basis. So how
do you exit?

28. In the next few posts and videos, I am
going to cover some ways that you can
exit your trades. Hopefully this will
help you from holding on long after all
signs pointed to an exit.

29. Download the Trend Jumper
Free Version
www.premiertraderuniversity.com/system