Define exit criteria from "summary" of The Trading Edge by Rickey Cheung
Exit criteria refers to the predetermined conditions that need to be met before a trader concludes a trade. These conditions help traders to decide when to take profits or cut losses, and can be set according to various metrics like price, time, or risk.- Exit criteria refers to the process of identifying when it’s time to leave a position in trading. It describes how traders determine when to get out and exit a trade, irrespective of whether they are making profits or not.
- The most crucial aspect of having an effective exit criteria strategy is that it should be tailored to fit your own investment style and goals.
- Having an established exit strategy is critical for any trader as it helps protect their account balance while also giving them control over their entry and exit decisions.
- In addition, you must take note of your risk tolerance as well as the volatility of markets you choose to trade in when designing an exit approach.
- To gain an edge in trading, always consider setting multiple exit points during your trades such as stop loss orders, profit taking points, and trailing stops. This will give you more chances to limit your losses and lock in profits.
- Once you’ve decided on an exit plan, put it into action immediately when starting to trade. Stick to your strategy and remain in true emotional control when executing your trades.
