My Trade Exit Strategies
I’ve traded for 9 years and this is everything I know about trade exits.
My 6 best strategies with real trade examples.
Let's begin:
This is detailed and requires focus. So if you’re busy right now, bookmark and come back later.
Let’s begin.
The 3 traps of ‘set and forget’
Most traders run a ‘set and forget’ process without any trade management. Something like this:
What they don’t know is that this approach leads to 3 traps… traps where even a trader with real edge can still lose money.
Trap 1: Winning Trade -> Loser.
You’ve just entered a trade. You’re feeling confident as the price travels 90% to your target. Then, out of nowhere, the price reverses and goes all the way down to your full stop loss.
You’ve fallen into a trap that turned a winning trade into a loser.
Trap 2: Leaving Money on the Table.
In this next scenario, you take a trade, and it steamrolls all the way to your target. You feel great and exit at the target. Later, you return to your computer only to see that the price has continued to rise by a further 20% past your target.
In this trap, you caught a winning trade, but the market was offering more than you captured.
Trap 3: Full Hit On Losing Trades.
Final trap now.
You’ve just entered a trade, and you regret it almost immediately. Goes completely against you. So you sit there, miserable and watch it go directly to your stop loss.
In this trade, despite clear warning signs, you lose the maximum amount.
My 6 trade management rules teach you how to avoid these traps.
I will teach you:
A few things to know about the article:
The examples I’ll use are based on:
But you can take these frameworks and apply them across strategies and timeframes.
Lesson Summary
Rule 1: Cut trades at FTA (Invalidating losing trades quickly)
This first rule is mechanical and targets ‘Trap 3: Full Hit On Losing Trades’.
Overview:
If after you jump into a position:
FTA stands for first trouble area, and I define it as the price level located 0.5 times your risk distance. So on a 1R trade, this would be -0.5R.
The idea is that if you enter a trade and the price goes straight to -0.5R, you cut the trade.
NOTE: you want the candle to close beyond that level, rather than to wick through it.
Why 0.5R specifically?
Over a significant sample size, my team determined that cutting at 0.5R offside on a candle close is an expected value positive (EV+) rule. That said, you don’t need to take this on faith. My free journal includes a ‘trade cut’ section for you to track this across your own data.
Bonus: Free Trading Journal
This Journal Review step is where most traders fall off: they have nowhere to track their data. I built a free journal so you do. It covers all 6 trade management rules, but this is where you’ll feel it first.
Download it 👉 click here.
Lesson Summary
Rule 2: Establish a time-based stop loss (At what point in time do your trades become EV-)
This second rule is also a mechanical one and targets ‘Trap 3: Full Hit On Losing Trades’.
The FTA rule catches trades that move against you in price. But some trades don’t fall into that pattern. They enter a limbo zone: not hitting your stop, not approaching your target, just sitting there.
Establishing a time-based stop loss frees up your capital, attention, and emotional energy.
Overview:
Step 1: Track your entry and exit time, trade duration, and whether your trade was a winner or a loser
If you’re using my free journal, you already have all these features.
Step 2: Solve for your average winner duration
If you’re using my free journal, just drop this formula on the trading log tab:
‘=AVERAGEIF(W6:W1000,"W",Z6:Z1000)*60’
Step 3: Multiply this number by 2
Simply multiply this number by 2 to get your time-based stop loss.
18 minutes x 2 = 36 minutes
Step 4: This becomes your time-based stop loss rule to cut your trades
In this example, the student's average winner is 18 minutes. So if they find themselves in a trade that lasts 36 minutes, it’s unlikely to be a winner.
TLDR: if you are stuck in a trade for roughly 2 times the average winning trade duration -> cut the trade.
Why multiply by 2?
Looking at 10,000+ of my own trades and those of my students, this is the point I’ve found where trades tend to be EV-. Again, test it yourself and see.
Lesson Summary
Rule 3: Cut based on volume trends (When is participation changing)
And now we introduce our first discretionary rule. It’s targeted at:
But takes a more pattern-based or visual approach. Better for traders with more experience.
Overview:
Before you get into a breakout trade, grinding price action with steadily increasing volume is the strongest continuation signal.
Grinding price action with volume that suddenly drops off after your entry is a warning sign, even if the price still looks clean.
Volume tapering tells you that participation is drying up, and moves without participation tend to stall or reverse.
Bottom line -> On your breakout trades, if you enter a long on resistance only to find that the price is stalling and volume drops off, you can decide to cut the trade early.
Lesson Summary
Rule 4: The 0.9R Rule (Understanding Evolving R)
Well done for making it this far. I suspect 80% of people gave up somewhere around rule 2… stay locked in for the final stretch.
The fourth rule is a mechanical rule targeting ‘Trap 1: Winning Trade -> Loser’
Overview:
The ‘Grab The Mouse’ Test
You’ve entered a trade.
You’re on the 1-minute timeframe, and about 20 minutes have passed.
Someone is standing behind you… They reach over, grab your mouse and close your position!
What do you do now?
Do you frantically re-enter the exact same trade (with the same stop and target), or do you decide you wouldn’t want to take this trade anymore?
For example, in the below trade, at entry, you were sitting on a 1:1 trade. Risk -1R for +1R reward.
But by the time the price travels +0.9R, your situation has changed. If you run the ‘grab the mouse’ test, would you really risk -1.9R just to gain +0.1R? That’s a 19:1 risk-to-reward ratio.
In technical terms, this is defined as Evolving R, where R stands for risk-to-reward ratio.
So, what’s the solution? I have a mechanical trade cut rule for you:
When the price reaches +0.9R in your favour, move your stop to +0.1R in your favour (approximately breakeven after fees and slippage). This eliminates the scenario where a trade reaches 90% of your target and then reverses all the way to your full stop loss.
Example:
You can set this up visually using the Fibonacci tool on your charting platform. Demonstrated below:
Lesson Summary
Rule 5: Using the Orderbook to Extend TP (Understanding liquidity to allow winners to run more)
This next rule is perhaps the most discretionary and advanced one.
It targets ‘Trap 2: Leaving Money on the table’ by leveraging one of my favourite profit maximisation tools -> the orderbook.
Overview:
Orderflow is the study of price movement in trading markets.
The orderbook itself is a live list of all limit orders waiting to be filled at different price levels. Passive limit sells sit above the price, and passive limit buys sit below. Price moves from one stack of limit orders to the next (not off lines you draw on a chart).
Some of those stacks are thick: lots of orders, lots of resistance.
Some are thin: barely anything there, easy for the price to slice through.
Bookmap is a powerful tool to help visualise the orderbook on your charts.
It shows you three things at once:
The 4 orderbook signals to extend take profit:
Example trade below:
Lesson Summary
Rule 6: Establish patterns for extending TP (High quality setup, onside right away, grinding to TP)
The last discretionary rule also targets ‘Trap 2: Leaving Money on the table’
Overview:
When 3 patterns align in a breakout trade, you can discretionarily extend your take profit. Example below:
Pattern 1: this trade was onside right away. Meaning, it went straight into profit or the ‘green’,
Pattern 2: there was a clean grind to TP. In other words, there was minimal criss-crossing or reverting to entry-level. It consistently moved towards the target.
Pattern 3: it was a high-quality setup. This can be determined by the presence of 4 variables that I’ve summarised below in a cheat sheet.
Lesson Summary
Bonus: Get Your Free Trading Journal
You've read the full masterclass.
But these rules really compound when you track them. That's what the journal is for, and you can grab mine free.
It's built to run alongside the six rules you just read:
