• Nial Fuller

    NIAL FULLER Nial Fuller
    Professional Trader, Author & Coach

    A Simple Plan To Exit Your Trades Successfully

    tradeexitsWhat is the hardest decision you have to make on any given trade? If you said the trade exit, you are correct and if you’ve traded for any length of time, you already knew that was the answer.

    Over my years of trading the market and helping traders, I’ve gained a lot of experience and insight into how best to manage and exit trades, and today I’m going to share some of that with you.

    To be clear, ‘trade exits’ means managing your stop loss and profit target as the trade unfolds. This can be a very tricky topic to tackle, because it is ‘tricky’ in reality, to put it nicely, as you probably already know. So, let’s dive into what I consider to be the best way to exit your trades after they are live in order to maximize profits and minimize losses…

    Why are trade exits so difficult?!

    Mentally, people make trade exits much more complicated than they ever need to be. They give into greed, they freak out and close trades out prematurely, they don’t give them time to work out, they don’t have a plan etc. These are some of the reasons why trade exits are hard for most people. The two most important things to realize, and what many traders have a lot of trouble accepting, is the following…

    1. You are NEVER going to get EVERY pip out of a trade. Meaning, you aren’t going to squeeze every last pip of profit from a trade. So, aim to take ‘chunks’ of profit, not the whole thing, because that is being greedy. Remember the old saying; “Bulls make money, bears make money, but pigs get slaughtered”, it’s so true.

    2. You are going to have to take losses sometimes, that’s just part of the game. Many traders, especially beginners, get caught up in a game of trying to ‘avoid’ losses. They do this until they blow out their accounts enough times to eventually realize they are going to have to accept losses are part of the trading game and develop a plan to deal with them properly.

    Also, you are going to have change your idea of a ‘successful’ trade exit. If you take a loss on a trade, as long as it was your predefined 1R risk amount or potentially less, I consider that a successful trade exit. In short, a successful trade exit is one that was not an emotion-induced exit and that can mean a loss or a win.

    OK, so trade exits are hard, what are you going to do about it? Cry about it? Give up? I hope not! I’m here to help you, so let’s get this stuff figured out….

    The ‘2R’ trade exit plan…

    I’ve developed what I call the ‘2R’ trade exit plan and in my opinion, if you follow it, it will help you make money over a series of trades in the market. Let’s talk about the logic and reasoning behind the 2R trade exit plan, exactly what it is and how it will help you become profitable.

    Here’s how it works:

    Now, here is where you need to pay close attention; over my 15+ years as a trader I’ve figured out that the best and most likely to be obtained risk reward ratio on average, is 2R. That is the ‘magic’ number you need to aim for, 2R. Now, understand that I am talking about using this trade exit plan with my price action trading strategies with a focus on higher time frames, this is assumed.

    Also, this doesn’t mean you will always take a 2R profit, it means that close to 2R or more is your goal on every trade, because anything less than about a 2R profit and it becomes increasingly difficult to make money consistently over the long-run. There may however, be times when taking slightly less than a 2R profit makes sense, if there is a very obvious price action change against your position for example, but first, I want you to learn this way of exiting trades…

    Here is the simple 2R trade management / exit plan broken down into 4 steps for you:

    1. Determine your 1R risk on the trade. Don’t exceed this dollar amount.

    First, if you don’t know what I mean by R or a trades ‘R value’, you need to read this. To review quickly, the R value of a trade is the risk you put on the trade, specifically the dollar risk. So, if you are risking $100 per trade for example, 1R is $100. We can then measure a trade’s potential reward in terms of risk, this is called risk / reward or risk to reward ratio. So, a trade with a 2R potential reward has a reward / risk ratio of 2 /1 or 2R; we are earning 2 times 1R on a 2R winner.

    Next, you start every trade by determining what your 1R risk is. I can’t do this for you, so don’t email me asking or I will just tell you this…you need to determine the dollar amount you are comfortable with losing per trade, because remember that ANY trade CAN potentially lose, and if you don’t understand why, then read my article on the random distribution of winners and losers in trading.

    2. Determine stop loss placement and position size

    Determine the safest and most logical stop loss placement. Remember to give the trade room to breathe and that trades often take longer to play out than we think. Don’t be greedy and put a tight stop loss on the trade just because you want to make more money. Over the long-run this will actually cause you to LOSE, not make money. Once you know your 1r dollar risk and your stop loss distance on the trade, you need to calculate the position size or number of lots you can trade to stay under your 1R risk.

    3. Calculate the 2R risk / reward level

    Once you’ve determined your 1R risk amount and place your stop loss properly, you can find the potential risk / reward on a trade, and my risk reward calculator can help you do this. The most important number is 2R. Look to see if, based on surrounding key support and resistance levels, a 2R reward or better is realistically possible. Most of the time, it will be, unless a very obvious / key support or resistance level is close to your trade entry.

    At this point, you also need to decide if you will place a profit target at the 2R level so that you are automatically taken out at a 2R profit OR if you will attempt to let the trade run to a 3R profit or greater. I recommend only aiming for more than 2R in obviously trending markets.

    4. Now, here is the key: Once your trade is live, you do not move your stop loss from its predefined position until or unless the trade moves past a 2R profit.

    At the point of obtaining a 2R profit you have two decisions to make, and this is where you must use your gut feel and personal discretion (you’ll get better at this over time). Depending on market conditions you either exit at 2R for the 2R profit, or move your stop loss to breakeven in an attempt to let your profit run into potentially 3R or more. If you anticipate a strong trend continuing or perhaps a strong breakout, these can be situations where you may chose this option.

    IF you hit 3R open profit, it’s time to make sure you make money on the trade and move your stop loss up to lock on that 2R profit, at that point you would be a fool to not at least make 2R on the trade.

    Now, why do I say move to breakeven at 2R instead of locking in 1R profit you might ask? Well, mainly because you need to give the trade room to breathe. If you are committed to letting the trade run for a while, you have to give it room; price will often come back a bit, and probably stop you out at 1R, before moving back in your favour. You will find that if you keep taking 1R profits, over time won’t make you money in the long-run. You’ve got to catch big moves in the market, and that means having the patience and discipline to leave your trades alone and give them the space they need to fluctuate and hopefully surge on in your favour.

    5. Don’t get down about a loss

    Understand that you will have losses, and there will be times when you see a trade move up to almost 2R and then come all the way back and stop you out for a loss. You cannot get down about this. This approach is about minimizing your thinking and letting the market do the ‘work’ for you. If you get into a game of micro-managing your trades and lamenting over every missed profit, you will be losing sight of the bigger picture, get bogged down in emotion and ultimately end up like most every other trader; a loser.

    “But, but, but…”

    I can already hear the ‘buts’, the ‘But Nial…’ and I have your answers….

    Yes, you will need patience to trade this way, yes you will need discipline. This is about becoming not only profitable trader, but a SKILLED TRADER, and this is how you do it. Through my 15 + years of trading and coaching, I have realized that the big money is made by waiting and taking high-quality trades and not freaking out at a loss and getting out of control. The money is made by catching big moves and making sure your winners more than double your losers.

    If you hit a 5R winner one month, that will pay for multiple 1R losers and still give you a profit. What you have to change is you’re thinking; you’ve got to realize that you don’t need to be in the market all the time and that less really is more in trading. When you start getting into a game of day trading or scalping / always being in the market, you are getting closer and closer to gambling and further and further from skilled, patient big-moving catching swing trading (how the ‘big boys’ do it). Remember, the trading industry is designed to get you to trade more, because that makes them more money, but you need to worry about HOW CAN YOU MAKE MONEY, not give it to your broker.

    If you don’t have a big account to start with, yes you will be trading smaller position sizes and not making ‘a lot’ of money even on say a 5R winner. But, isn’t making SOME money and being consistent with your approach over the course of a year a lot better than losing money, taking hundreds of trades and being frustrated, confused and mad at year’s end?

    You have to let go of the ‘get rich quick’ dream and take a longer-term approach. Focus on trading properly on building your account slowly over time along with a consistent track record. Show me a slow, but consistently profitable track record on a live account, even on only a $1,000 account, over the period of a year, and you will be the type of person with a high potential of attracting funding from private investors or even the attention of prop trading firms or banks.

    Most retail traders, both with small and big accounts, doom themselves early-on because they are focused on ‘making money’ fast, rather than on the process of trading and on slowly building their trading account over time. It takes patience and the mindset of a hardened professional to let a trade play out over 2 or 3 weeks and then possibly take a 1R loss. But, I promise you that when you make a 3R winner or even a 2R winner on your next trade, which may take 3 days or 3 weeks, you won’t care about that last 1R winner anymore, you’ll be happy that you got rewarded for having patience and you’ll feel optimistic about your trading future because you’ll know you earned the profit the right way and not through greed or luck.

    To get started learning my price action strategies and more about my approach to trade management, check out my professional trading course – here.

    PLEASE LEAVE A COMMENT BELOW – I WOULD LIKE TO HEAR YOUR FEEDBACK :)

    QUESTIONS ? – CONTACT ME HERE

    Print Friendly, PDF & Email

    Nial Fuller

    About Nial Fuller

    is a Professional Trader, Investor & Author who is considered ‘The Authority’ on Price Action Trading. His blog is read by over 200,000+ followers and he has taught 25,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.
    Nial Fuller Professional Trading Course Preferred broker 2020 v1
    1. Krzysztof

      Thanks Nial, for this article.
      I see no any answers from You for many questions above, but… anyway I will try :)

      What about our psychology in trading? What if I feel myself better if I move SL to BE just to avoid losses?
      Thanks to You, I know and I follow all mentioned in article steps except this one. But for me it is much more comfortable.

      Greetings from Poland :)
      Krzysztof

      Reply
      • Tommydearest

        You’ll miss out on a LOT of winners. Giving those trades room to dip below break even is kind of the whole point of this post.

        Reply
    2. VY

      Thanks for this great article. I have learned a lot from it. I’ve been having problem of exiting trades too early and watched it continuing running in tears. I will apply this strategy

      Reply
    3. Gandus

      Lovely, optimistic that my life is changing with Nail Fuller. God bless you more Nail.

      Reply
    4. Mamoun

      It is great lesson as usual

      thanks Nial

      Mamoun ALI

      Reply
    5. uhweeka ika

      A very informative post. I will definitely heed to this advice. Thank you and keep it up.

      Reply
    6. Gloria

      Pure Genius

      Reply
    7. Ahsan Ali

      excellent job

      Reply
    8. Muhammad Ali

      Thank you so much this was a nice artical but you have to write a special artical on patience how we can contorl our self for a foolish trade

      Reply
    9. Bongani Muthisi

      For those of us who can learn by instructions, and actually do what we are told, you have saved us thousands of rands we could have lost to the markets or to useless Forex teachings that are misguided. And woe unto those who learn after they have been hurt the very thing they were warned about. You’re breath of fresh air Sir. Thanks

      South Africa

      Reply
    10. Abdul Momin DT

      THANKS

      Reply
    11. Samir musa

      This is one of the best article

      Reply
    12. elmer

      Thanks Nial for your insights!!!God speed!!

      Reply
    13. Kenneth

      Thank you Nial for such a wonderful post.

      Reply
    14. David Soetsang

      Thank you, for help with exit

      Reply
    15. Sthembiso

      Thanks Nial

      Reply
    16. mithamo

      very informative and that means one more tilt of odds to traders favour

      Reply
    17. sez elabor

      Great article Nial..

      Reply
    18. Karol

      What about closing the half position at 2R and move the second half to BE?

      Reply
    19. Sammy

      I have been trading for a while. Once I reachreach 1:1R, I pull out half of my position and break even thereby locking in some profits and let the remaining position run.

      Reply
    20. Karol

      Nial, what You think about after 2R move SL to BE and close half profitable position?

      Reply
    21. rosalee

      Very true, Nial! I tend to always experiment with many things about trading, though I have read your advises, your blogs more than 5x! And I will tell you now, you are right, Nial! I should be a better, more obedient student! lol

      Reply
    22. Olatunde Ademola

      The patience and discipline is something very hard! I have lost twice this year after 4 and 2 weeks of managing these trades. Besides, the long term perspective is not easy.
      I have got to realign my trading so that for the next 9 months.

      Thanks Nial.

      Reply
    23. Nick Warwick

      This stuff is a goldmine. It goes beyond platitudes and really gets to what makes a difference. And hearing regularly from someone who’s on our side is invaluable in itself.

      Reply
    24. David Soetsang

      Thank you, Neil for give such simple way to exit a trade. It is most practical and easy to apply.

      Reply
    25. James

      The concepts & strategies i basically use here except for one important caveat. I currently move my stop to breakeven once i am 1R up instead of 2R up. Maybe i need to change this as 20% of my trades turn out break even.

      Reply
    26. Vasilika

      Trade is something new for me.But you with this article teach me that to be a good trader need discipline and patience . Thank you

      Reply
    27. William Pennington

      That’s for the great exit strategy Nial. I love the simplicity of it. And with your 15+ years of experience behind it, I will definitely use this strategy on my exits from now on. Just like the other traders here have said, exiting has been my biggest struggle in trading. This will take a lot of stress off my shoulders in my future trading.

      Reply
    28. Emmanuel

      Good piece of info. Thanks

      Reply
    29. collins fx

      Hi Nial, thanks for your teachings i have been following your strategy and i find it awesome, and stress free way of trading, God bless you for what you have been doing to many of us. thanks Again Nial.

      Reply
    30. Mark Dowling

      Nial, in an earlier post you suggested we examine our preferred plays each day (based on the NY close) (I’m on Australia time so NY close is very handy) then go do something else while the market does its thing.

      However – if I do this, and I’ve set my TP at 2R, chances are it will jump up and my play will exit while I’m off frolicking in the surf.

      So can I ask – do you suggest setting TP at (say) 3R, or is there some MT4 automation script that can jump me from 2R to 3R or beyond, and move my SL at the same time? This would only be in a trending market, as you suggest.

      The only other option I can think of is to stay glued to the screen (which I don’t want to do) if I want my TP & SL to move when the market is right.

      Having said all that, I’m very happy to take 2R on any play and, if the trend remains, enter a new one when I get back to MT4 (hopefully, for another 2R win).

      Reply
    31. John

      Very important article. One can find many strategies with an edge but without the courage to accept losses and I mean really accept losses, trading will be really tough. Thanks for the reminder.

      Reply
    32. Lincoln

      For the aspiring trader:- The pursuit of knowledge and development of ability, a result in modest independent financial means is the real reward. More valuable than anything the false god of easy riches could possibly afford.

      Reply
    33. Brian Pittman

      Another great article and words of wisdom Niall. The reminder of discipline and patience never grow old. Thank you!

      Reply
    34. Monica

      This article hit me square between the eyes!! You nailed me and my weaknesses perfectly!! This is exactly what I’ve been battling with!! Great article!! Many thanks!!

      Reply
    35. Tshepo

      You know your game very well thanks for the hint .

      Reply
    36. John

      This was such a great article. Trading in it’s self is not hard.what is hard, is,keeping those dreadful human instincts at bay. Please keep the very informative articles coming,we can use all the encouragement you can provide.Thanks Nial

      Reply
    37. Kat

      One of your better articles, yet, and just at the right time:) You know how to drop an article our way and when best to do it! Thanks a million:)

      Reply
    38. Margaret Tonkin

      Thanks Nial – always good articles. Thanks for the help!

      Reply
    39. Michael Dunn

      Great stuff as always Nial , Thank you so much

      Reply
    40. Antonio

      Great article i love it thanks :)

      Reply
    41. Brad

      Great article Nial..

      Reply
    42. Rahmat Hidayat

      Thank you for good article.

      Reply
    43. Khesiwe

      Thanks Nial nice article

      Reply
    44. Gulzar

      Simply … Fantastic

      Reply
    45. KRISTOFA OKENTA

      Thanks to you dear GOOD TEACHER.
      Nice lesson and great advise.

      Reply
    46. This came as an eye opener that I never anticipated.

      I have always tried to follow the trade progressing with a move of the stop loss to lock in some profits. In the beginning I did get stopped out but now I am becoming more cautious. But when we think about your long term approach to trading I see the light. I am always tempted to scalp when I see something likely- it is my gambling nature that kicks in I know. I am trying to fight this because I know you must be right and not me.

      Thanks for this advice Nial.

      Reply
    47. Toni

      Your articles are the highlight of my workday, thank you!

      Reply
    48. Pier Felice

      Thanks Nial,
      according to the sentence “Exit strategy makes the difference in trading succesfull” I think this is one of the most useful articles you’ve ever written.

      Reply
    49. Alistair Ford

      good article

      Reply
    50. BARRIE STRONG

      my strategy is NEVER to predetermine a take profit exit. The T.Line does this for you. Once the P.A crosses the T.Line (i refer to the body of the candlestick) by more than 50% then close the position.

      Reply
    51. Shankara Motay

      Very nice article as usual. Thanks.

      Reply
    52. Sabelo

      I think managing the exit strategy is being my challenge since I started trading. Just get confused whether I should hold or close especially when I am losing. I end up being on a rat race kinda i.e. make money, lose money. But thanks for the article Nial

      Reply

    Leave a Comment

    Your email address will not be published. Required fields are marked *