Entries get all the attention, but exits determine how much of a correct call you actually convert into profit. Many traders identify the right direction and still lose money because their exit plan is either nonexistent or purely emotional.
Fixed R Targets
Set a target at a predetermined multiple of risk (e.g. 2R) at trade entry, based on a realistic level like the next resistance/support or measured move. This removes decision-making mid-trade but caps upside on trades that could have run further.
Trailing Stops
Instead of a fixed target, let the trade run and move the stop behind price as it advances (behind each new swing low, or a multiple of ATR behind current price). This captures large trends but gives back some profit on the way out, and can trail you out of trades too early in choppy conditions.
Trailing Stop (long) = Highest Price Since Entry − (ATR × Multiplier)Scaling Out (Partial Exits)
Close a portion of the position at each of several targets, letting a runner ride with a trailing stop. This is the most popular compromise between banking profit and capturing trend extension.
Worked Example: 3-Tranche Exit
| Tranche | Size | Target | Action |
|---|---|---|---|
| 1 | 40% | 1R | Close, move stop to breakeven |
| 2 | 30% | 2R | Close, trail remainder |
| 3 | 30% | Trailing | Ride the trend with ATR trail |
This structure guarantees a small win once 1R is hit (since the stop moves to breakeven), locks in a solid gain at 2R, and keeps exposure to outsized moves via the runner — all while reducing the emotional pressure of watching one all-or-nothing target.
Moving the stop to breakeven after a partial close is sound risk management. Moving it to breakeven the instant a trade is +5 pips in profit is not — it just gets you stopped out of good trades on normal pullbacks.
Choosing an Approach by Strategy Type
- ▸Mean reversion / range trading: fixed R targets at the opposite range boundary.
- ▸Trend following / breakout: trailing stops or scaling out, since the whole edge is in capturing extended moves.
- ▸News / event trades: fixed target and time stop combined, since volatility decays fast after the event.
Record what % of the theoretical max move you actually captured on each trade. If you're consistently leaving 70% of the move on the table, your exit method — not your entries — is the leak to fix.