Exit Strategies for Trading Positions

Highlighting Key Exit Strategies to Boost Your Trading Positions

Sofien Kaabar, CFA

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In trading, an exit refers to the act of closing a trade or position in the financial markets. It is the opposite of the entry, which is when a trader opens a position. Exiting a trade is an essential part of trading strategies and is crucial for managing risk and realizing profits or losses.

Trading Exits

When you enter into a trading position, you will have to eventually exit it at some point in time. Exit techniques are numerous and you have to choose the one that fits your profile but also the one that provides the best risk-reward profile. Below are a few ways to exit your position.

1/ The Moving Average Exit

Moving averages can also be used as exit indicators. The following list shows a few examples:

  • Buying whenever the MACD shapes a bullish divergence and exiting whenever the market breaks its 20-day moving average.
  • Selling short whenever the MACD shapes a bearish divergence and exiting whenever the market surpasses its 20-day moving average.

Take a look at the following chart to understand more the technique.

2/ The High-Low Conditional Exit

This exit strategy uses the extremes of the time period. The following list shows a few examples:

  • Buying whenever the CCI is at a support level and exiting whenever the market closes higher than the high from 5 periods ago.
  • Selling short whenever the MFI is at a resistance level and exiting whenever the market closes lower than the low from 5 periods ago.

Take a look at the following chart to understand more the technique.

3/ The Time Exit

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