Exit Strategy Guide Build Rules for Stop Loss and Take Profit
Planning your exits before entry removes emotion from trading decisions. Learn the fundamentals of stop loss and take profit placement, and build a consistent exit strategy framework.
30-Second Summary
- 1Set stop loss first
- 2Target 1.5-2x your risk for profit
- 3Never move stops against you
Why Exit Strategy Is Key to Trading Success
Your exit strategy is a core component of your trading plan. Combined with proper risk management, it protects your capital while allowing profits to grow.
Deciding "when to exit" before you enter removes emotional decision-making and creates consistency in your trading.
Risks of Trading Without an Exit Strategy
- • Watching profits turn into losses
- • Small losses becoming account-destroying drawdowns
- • Emotional decisions replacing logical planning
Stop Loss Basics
A stop loss is your emergency exit when the market moves against you. Place it at technical levels, not random distances.
Simple Example
EUR/USD Buy 1.0850 entry
Stop Loss 1.0800 (below recent support, 50 pips)
Master Effective Stop Loss Placement
Discover practical examples, common mistakes, and systematic rules for stop loss placement.
Read Stop Loss GuideTake Profit Basics
Take profit orders lock in gains at predetermined levels. Aim for positive risk-reward ratios to stay profitable long-term.
Simple Example
EUR/USD Buy 1.0850 entry
Take Profit 1.0950 (100 pips, 1:2 risk-reward)
Strategic Profit Taking Methods
Learn practical examples, common pitfalls, and systematic approaches to profit targets.
Read Take Profit GuideSimple Exit Strategy Template
Pre-define your rules to eliminate emotional decisions. Use this template to build your own exit strategy.
Basic Template
🔴 Stop Loss Rules
- Condition Price clearly breaks below support/above resistance
- Action Exit immediately at stop loss
- No exceptions Never hope for reversal, follow the plan
🟢 Take Profit Rules
- Condition Profit reaches 1.5-2x risk amount
- Action Close position at target
- Alternative Exit at major resistance/support levels
📋 Pre-Trade Checklist
- ✓ Stop loss level determined
- ✓ Risk-reward ratio calculated
- ✓ Profit target identified
- ✓ Rules documented
Once your stop loss is set, use thePosition Size Calculatorto determine the appropriate lot size for your risk tolerance.
Practical Checklist & Next Steps
Practical Checklist
Define your stop loss and profit criteria
Test your rules without real money risk
Track whether you follow your rules consistently