The screenshot below shows the final outcome. The price did move higher, back into the Daily supply zone that we identified at the beginning of this article.
When it comes to exit strategies, traders can choose between different options, depending on the overall trading approach:
- Day traders often use an end-of-day exit strategy whereby they close any open positions at the end of the trading day. In trading, we call this a time-based exit.
- Swing trading strategies typically do not have a time-based exit, and swing traders hold their trades for extended periods of time.
- An open-ended exit does not include a pre-determined take profit level. Traders using an open-ended exit typically utilize a trailing stop loss approach strategy. Trailing the stop loss behind a moving average is a common choice. That way, traders hope to maximize their profits during extended trending periods.
- A fixed exit approach uses pre-determined take profit orders. In the chart example of this article, the trader could have placed the take profit level just underneath the supply zone during the time of the trade entry. With a fixed exit, the trader can calculate the reward:risk ratio of their trades and apply a more passive trade management approach compared to the open-ended exit.
As already mentioned multiple times during this article, picking one specific exit strategy rule and then applying it consistently across all trades is the key. The goal of a trading plan is to standardize decision-making which can have many benefits as we are going to explore further below in the next section.