Entry and Exit Strategies — Breakouts, Pullbacks & Trailing Stops
Learn when to enter and exit trades. Master breakout entries, pullback entries, and how to trail your stops for maximum profit.
Knowing what to trade is only half the battle. Knowing when to get in and when to get out is what separates profitable traders from the rest. A great entry with a bad exit can turn a winner into a loser — and vice versa.
Breakout Entries
A breakout happens when price moves beyond a defined level — above resistance or below support. The idea is that once a level is broken, momentum will carry the price further in that direction.
How to trade it: Wait for the candle to close above resistance (don't jump in on a wick — it might reverse). Check that volume is above average. Set your stop-loss just below the breakout level.
Example: AstraZeneca shares consolidate between £105 and £110 for three weeks. On Wednesday, the daily candle closes at £111.50 on double the average volume. You enter long at £111.50 with a stop at £109.50. Your target is the width of the range added to the breakout: £110 + £5 = £115.
Pullback (Retracement) Entries
Instead of chasing breakouts, pullback traders wait for the price to retrace to a key level before entering in the direction of the trend. This often gives a better entry price and a tighter stop-loss.
Where to enter: Look for price to pull back to a moving average (the 20 or 50 EMA), a previous resistance-turned-support level, or a Fibonacci retracement level (38.2% or 61.8% are the most watched).
Confirmation: Don't just buy because price touched a level. Wait for a bullish candle pattern (hammer, engulfing) at the pullback level. This confirms that buyers are stepping in.
Exit Strategies
Your exit strategy determines your actual profit or loss. Here are the main approaches:
Fixed target: Set a price target before you enter and close the trade when it's hit. Simple but effective. Use a minimum 2:1 reward-to-risk ratio — if you're risking £100, your target should be at least £200.
Partial exits: Close half your position at the first target and let the rest run. Move your stop to breakeven on the remaining position. This locks in some profit while giving you upside potential.
Trailing stop: As the price moves in your favour, you move your stop-loss up (for longs) to lock in more profit. You can trail by a fixed distance, below the latest swing low, or below a moving average.
Trailing Stop Example
You buy BP shares at £5.00 with a stop at £4.80 (risking 20p per share). The price rises to £5.40. You trail your stop to £5.20 — locking in a 20p profit per share even if the market turns. Price continues to £5.80. You trail to £5.55. Eventually, BP pulls back and hits your stop at £5.55. You made 55p per share instead of the original 20p target.
The key is giving the trade enough room to breathe. A trailing stop that's too tight will get hit on normal pullbacks. Too loose and you give back too much profit. A common approach is trailing below the previous swing low on your trading timeframe.
⚠ Common Mistakes
- ✗Moving your stop-loss further away to "give the trade more room" — this increases your loss
- ✗Closing winners too early out of fear — let your plan dictate exits, not your emotions
- ✗Holding losers too long hoping they'll recover — "hope" is not a strategy
Risk Warning
Trading and investing carry significant risk. You can lose more than your initial deposit when trading leveraged products. Past performance is not indicative of future results. The content on TradeLearn is for educational purposes only and should not be considered financial advice. Always do your own research and consider seeking advice from a qualified financial adviser before making investment decisions.