A very common question that I get asked is:
“How do you know when to exit a trade?”
It’s a fair question.
After all, opening a trade is only half the job. Knowing when to take a profit or accept a loss is just as important.
The truth is, there isn’t a single answer.
Every trade is different, and the best exit depends on the reason you entered the market in the first place and also how good that entry was.
The Exit Starts Before You Enter
One of the biggest mistakes beginners make is thinking about the exit after they’ve already opened a trade.
Experienced traders tend to do the opposite.
Before entering a trade, I already have a good idea of what I’m expecting to happen and what might cause me to close the position.
Having a plan removes much of the emotion that can creep in once the market starts moving.
You should actually have 2 plans. One for if the trades goes as you expected, and another plan for if it doesn’t.
There Isn’t A Magic Exit Point
Many new traders hope there’s a simple rule they can follow if a trade doesn’t go as planned.
That would be nice, wouldn’t it? If you enter a poor value trade and it goes wrong, just do x, y and z and get out for a tiny red.
It is not the exit that controls your loss. It’s the ENTRY.
If you wait for a good value entry point, you automatically limit your potential loss in the current set.
If you take poor value with your opening trade, you MUST be right about which way the market is going to move.
Every match develops differently, and the market reacts accordingly. You need to put yourself in a position to take a profit
while also factoring in the possibility that you might be wrong.
Trying to come up with one rule that suits every situation will just lead to frustration.
Let The Match Guide You
One of the reasons I enjoy trading tennis is that every match is different.
Of course, there are similarities but there are also so many variables
Momentum changes.
Players gain confidence.
Others begin to struggle.
Existing injuries.
Market perceived injuries.
Sometimes everything develops exactly as expected.
Sometimes it doesn’t.
Rather than trying to force every trade to follow the same pattern, it’s important to at least try to understand what the match is telling you.
I use the fluctuations in the in play stats for each player. They often give us a small insight into how a player’s level of play is developing.
Don’t Let Greed Make The Decision
We’ve all experienced it.
A trade is showing a healthy profit, but instead of taking it, we start thinking:
“I’ll just wait for one more game.”
Sometimes that works.
Quite often it doesn’t.
Allowing greed to make decisions can quickly turn a good trade into a disappointing one.
That’s why having a plan before you enter the market is so important.
Accept That You Won’t Catch Every Tick
This is another lesson that takes time to learn.
Many beginners become frustrated when they close a trade only to see the market continue moving in the same direction.
Don’t get me wrong, this never stops being frustrating. After 17 years, now I now laugh. I know there will be another match, Another trade.
The reality is that nobody consistently catches the perfect entry or the perfect exit.
The goal is to make consistently good decisions over hundreds of trades, not to squeeze every possible tick out of every position.
Sometimes The Best Decision Is To Take A Small Loss
Not every trade works.
That’s part of trading.
One mistake many beginners make is refusing to accept they got it wrong.
Instead of closing the trade, they hope the market will recover.
As soon as you’re staying in a trade for no other reason than you are hoping it turns around. EXIT.
Sometimes it does.
Sometimes it doesn’t.
You need a solid reason to stay in a trade. One that, if needed, you could explain it to someone sitting next to you
Accepting a small, controlled loss is often the decision that protects your trading bank over the long term.
A trade that ends in a small loss but in which you made good decisions, will not affect the decisions that you are going to make later in the trading session.
If you lose your mind and end up with a chunky red due to not following the rules, take a break. You are less likely to make good decisions in the next couple of hours.
Experience Builds Confidence
The more matches you trade, the more comfortable you’ll become making exit decisions.
You’ll begin to recognise familiar situations and understand how different matches develop.
With experience comes confidence.
Instead of reacting emotionally to every point, you’ll be making decisions based on your trading plan and what you’re seeing unfold on court.
Knowing what the “right thing to do” in any given situation is really helps your confidence.
Don’t make the mistake of thinking that doing the “right thing” guarantees a profit though!
Final Thoughts
Knowing when to exit a trade isn’t about finding a magic formula.
It’s about preparation, discipline and understanding why you entered the trade in the first place.
No trader exits every position perfectly, and that’s perfectly normal.
The aim isn’t to catch every last tick.
The aim is to make good decisions consistently over time.
In my TradeShark Tennis Trading Course, I explain the thought process behind different types of trades and the factors that influence my exit decisions. Once you understand why a trade was opened, deciding when to close it becomes far more straightforward.
FAQ articles
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Why Trading Isn’t The Same As Betting
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