When conducting trades, most traders usually tend to focus on the entry point, always seeking the best timing to enter the market to maximize profits. However, it is the exit that actually determines the level of profit or loss for traders. Therefore, the exit strategy in trading is somewhat more important than the entry, so how should traders correctly find the exit timing?

The exit largely depends on the time the trader holds, that is, the duration of the trade. Common exit strategies include using support and resistance levels, trailing stops based on moving averages, and strategies based on volatility, which are also the most commonly used exit strategies by traders. Now, we introduce three more effective exit strategies.

Advertisement

1. Price Action Channel Exit Strategy

Price action channels are commonly used to determine the strength and momentum of a trend, allowing traders to maximize profits from that trend. To establish a channel, set upper and lower moving averages, smoothing parameters, high/low prices, etc. Hold the trade until a bar closes on the opposite side of the channel.

The execution of the channel exit is very simple. Suppose we decide to use a 20-day channel exit in a long trade, every day of the trade, we should determine the lowest low of the past 20 days and position our exit at that point. Many traders may position the stop loss a few points closer or further than the actual bottom price based on preference.

As the price moves in the direction of the trade, the lowest low of the past 20 days continues to rise, allowing the "tracking" to continue the trade and protect some of the profits. The channel stop only moves in the direction of the trade. When the price falls through the lowest low of the past 20 days, the trade can be exited through a sell stop order.

A longer channel length is usually more effective in long-term trend-following strategies, while shorter channels tend to make more profits in shorter trends.

2. Fibonacci Extension Exit StrategyThe Fibonacci indicator is one of the most effective technical analysis tools, once again proving that trading is not a matter of luck but of mathematics. A set of ratios calculated through the Fibonacci sequence almost always guarantees trend reversals and can be used as exit points.

Some of these values are: 123.6%, 138.2%, 161.8%, 261.8%, and 361.8%. Traders can use specially designed drawing tools to indicate these on the chart and use the crossover points between the values and price movements as exit points. In highly liquid financial trading markets, traders use Fibonacci ratios to determine technical levels, which become effective stop-loss levels for managing open positions.

The combination of Fibonacci levels and pivot points is very powerful. When these two indicators align, professional traders will pay special attention to them, and the exchange rate will clearly capture these levels. To simplify Fibonacci retracements and extensions, we usually use 0.618, 1.0, and 1.618, and ignore other numbers generated from the sequence.

3. Exiting when touching the previous day's high or low price

The main factor behind price movement is the psychology of traders. Traders tend to react according to how most people respond to certain situations in the market. Thus, an exit point located near the previous day's high (slightly below its high) is one of the best solutions for profitable trading.

The most important result of any trading exit strategy is that the exit point should be as carefully planned and prepared as the entry point. After all, the exit is where you can see the results of the trade. What traders need to remember is that once the order button is touched, anything can happen.