Exit Point
Definition
The price level at which a trader closes a position to take profit or cut losses.
In Detail
Your exit point is where you close a trade, and it ultimately determines whether you make or lose money. There are three types of exit: a stop loss exit (closing at a predetermined loss to protect capital), a take profit exit (closing at a target price to secure gains), and a trailing stop exit (a dynamic exit that locks in profits as price moves in your favour). Most trading education focuses heavily on entries, but experienced traders know that exits matter more. A mediocre entry with a well-managed exit can still be profitable, while a perfect entry with poor exit discipline can easily turn into a loss. The biggest psychological challenge with exits is that they force you to make a decision under pressure — cutting a loss means admitting you were wrong, and taking profit means accepting you might miss further gains. Having predefined exit levels before you enter a trade removes this emotional pressure entirely and turns exit decisions into mechanical execution.
How to Use in Trading
Define both your stop loss exit and your profit target before entering any trade — this is non-negotiable for disciplined trading. For stop losses, place them at a technical level where your trade thesis is invalidated (below support for longs, above resistance for shorts), not at an arbitrary percentage. For take profit targets, use the next significant resistance level, a measured move projection, or a fixed risk-reward multiple (e.g., 2:1 or 3:1). Consider scaling out of positions in portions: take half your position off at the first target and trail the stop on the remainder to let winners run. Once a trade is comfortably in profit, move your stop to breakeven so you cannot lose money on the trade. The one rule that should never be broken: never move a stop loss further away from your entry to give a losing trade "more room" — this is how small losses become large losses.
Example
You buy a stock at $100 with three exit levels planned. Stop loss at $95 (below the support zone where your thesis is invalid). First target at $110 where you sell half the position and move the stop to $102 (locking in a small profit on the rest). Second target at $118 for the remaining half, or if price stalls you switch to a trailing stop at 2× ATR below the current price. Price rallies to $112 — you sell half for $12 per share profit. You move your stop to $102. Price continues to $120, your trailing stop is at $115, and a pullback triggers it. Final result: half the position gained $12/share, the other half gained $15/share. Average gain of $13.50 against an initial risk of $5 — a 2.7:1 reward.
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Related Terms
More Trading Terms
Ask Price
The lowest price a seller is willing to accept for an asset. Also called the offer price.
ATH (All-Time High)
The highest price an asset has ever reached in its trading history.
ATL (All-Time Low)
The lowest price an asset has ever reached in its trading history.
Bid Price
The highest price a buyer is willing to pay for an asset.
Breakout
When price moves above resistance or below support with increased volume, potentially signaling a new trend.
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