The Entry Is Just the Beginning
Most traders obsess over entries. When should I buy? Where's the perfect entry? They spend 90% of their time analyzing setups and 10% managing the trades they take.
Professionals reverse this ratio. They know entries matter, but trade management determines whether you make money.
A perfect entry with poor management loses money. A marginal entry with excellent management makes money.
This article covers what happens after you click the buy or sell button.
The Three Phases of a Trade
Every trade has three phases:
- Entry: Getting into the position
- Management: What you do while in the trade
- Exit: Getting out of the position
Most traders focus on phase 1 and 3. They neglect phase 2, which is where profits are made or lost.
Trade management includes:
- When and how to move your stop loss
- When to take partial profits
- When to add to positions
- When to hold vs. when to exit
- How to handle unexpected news or events
Stop Loss Management
Your initial stop loss goes in when you enter. That's fixed. But as the trade moves in your favor, your stop should move too.
Breakeven Stops
Once your trade is profitable, consider moving your stop to breakeven (your entry price). This transforms a losing risk into a risk-free trade.
When to move to breakeven:
- Too early: You get shaken out of good trades
- Too late: You give back profits on reversals
Common approach: Move to breakeven when price reaches 1R (one times your risk) in profit.
Example: You buy at $100 with a stop at $95 (5R risk). When price hits $105, move your stop to $100. You're now risking zero.
The downside: You get stopped out at breakeven on pullbacks that would have eventually hit your target. This happens. Accept it as the cost of protecting your capital.
Trailing Stops
A trailing stop moves as price moves in your favor, locking in profits while staying in the trade.
Trailing methods:
Fixed pip/point trailing:
- Your stop trails price by a fixed amount
- Example: You're long at $100. Your stop trails $5 behind price
- At $105, your stop is at $100
- At $110, your stop is at $105
- Simple but can get you out on normal pullbacks
Swing high/low trailing:
- Your stop sits below the most recent swing low (for longs) or above the most recent swing high (for shorts)
- More room for normal price fluctuation
- Lets you ride bigger trends
Moving average trailing:
- Your stop trails below a moving average (for longs) or above a moving average (for shorts)
- Common choices: 21 EMA, 50 SMA
- Smooths out price noise while staying close to the current price
ATR-based trailing:
- Your stop trails by a multiple of Average True Range
- Example: 2x ATR below price for longs
- Adapts to volatility - wider stops in volatile markets, tighter in calm markets
When to start trailing:
- Don't trail immediately. Give the trade room to breathe.
- Wait for price to move at least 1R or 2R in your favor.
- Then begin trailing.
How aggressively to trail:
- Tighter trailing = more profits locked, but more risk of early exit
- Looser trailing = stay in longer, but give back more on reversals
- No perfect answer. Adjust based on your backtesting and experience.
Stop Management Rules
- Never widen your stop loss after entry
- Your initial stop was based on your analysis and risk
- Widening it means your analysis was wrong or you're emotionally attached
- Either accept the loss or exit earlier
- Only move stops in the direction of profit
- Long: stop moves up, never down
- Short: stop moves down, never up
- Move stops based on price action, not emotion
- Have pre-planned rules for when to move stops
- Don't adjust stops because you "feel" the market will reverse
- In fast markets, give your stops more room
- Volatility expands, normal fluctuations widen
- Tight stops will get hit in volatile conditions
- Use ATR to adjust stop distance
Taking Partial Profits
Should you take some profits early or hold for the full target? Both approaches have merit.
Arguments for Partial Profits
Locks in gains: Banking some profit guarantees you walk away with something. The market can reverse after hitting your partial target, but you've secured a win.
Reduces psychological pressure: With some profit secured, you're less stressed. You make better decisions on the remainder of the position.
Improves win rate: Even if the full target gets missed, you still made money. More small wins vs. fewer big wins.
Capitalizes on mean reversion: Markets often make an initial move, then retrace. Taking partials at the first target captures this.
Arguments Against Partial Profits
Reduces expectancy: Your biggest winners get cut short. Over time, this hurts your overall results.
More work, more stress: Managing partial exits requires more decisions and monitoring. You have to re-enter if you still want exposure.
Transaction costs: More entries and exits mean more commissions and slippage.
Confuses performance tracking: Did the trade work? You took a partial profit, then got stopped out on the rest. Was this a win, loss, or partial?
A Balanced Approach
Take partial profits when:
- Price hits a major resistance level and you're unsure if it will break through
- The overall market shows signs of reversing
- You've reached your first profit target and want to reduce risk
- You're trading a lower-timeframe scalp and the initial move was strong
Hold full position when:
- The trend is strong and showing no signs of reversal
- You're playing for a bigger move (swing trade)
- Price hasn't hit any major levels yet
- Your backtesting shows holding works better for this setup
Common partial profit strategy:
- Take 50% profit at 1R or 1.5R
- Move stop on remainder to breakeven
- Hold remainder for full target (2R or 3R)
This secures some profit while keeping upside potential.
Adding to Winners
Pyramiding is adding to a winning position. Done correctly, it amplifies gains without increasing initial risk.
When to Add to Positions
Add only when:
- The trade is already profitable by at least 1R
- Price pulls back to a logical entry point (support, trendline, moving average)
- The original setup still valid - trend intact, no major reversal signals
Never add to losers. This is averaging down, not pyramiding. It increases risk and ties up capital in losing trades.
Pyramiding Methods
Equal-sized additions:
- Add the same position size each time
- Example: Start with 100 shares. Add 100 more at first pullback, 100 more at second pullback
- Your average price changes with each addition
- Simple but increases risk quickly
Reduced-sized additions:
- Add smaller positions each time
- Example: Start with 100 shares. Add 50 at first pullback, 25 at second pullback
- Keeps average price closer to your initial entry
- Reduces risk on later additions
Pyramid shape:
- Largest position at entry, progressively smaller additions
- Example: 100 shares initial, 75 shares first addition, 50 shares second addition
- Your largest size is at the best price (earlier in the move)
- Reduces risk while maintaining exposure
Risk Management for Additions
Each addition is a new trade. It should have its own stop loss.
Example:
- Initial: Long 100 shares at $100, stop at $95 (risk $500)
- Add: Long 50 shares at $110, stop at $105 (risk $250)
- Total risk: $750 if both stops hit
Your total risk includes all positions. Don't treat additions separately.
When to Stop Adding
Stop adding when:
- Price extends far from your original entry (you're late to the move)
- The trade becomes too large relative to your account (position size risk)
- You're unsure if the trend will continue
- You've hit your maximum planned size for this trade
Holding Through Pullbacks
Every winning trade experiences pullbacks. The question: how much to give back before exiting?
Evaluating Pullbacks
Ask three questions:
- Is the original setup still valid?
- If the reason you entered no longer applies, exit
- If the setup still works, hold through normal pullbacks
- Is this a normal pullback or a reversal?
- Normal: Shallow retracement (38.2-50% of move), holding at support, volume decreases
- Reversal: Deep retracement (>61.8%), breaking structure, volume increases, momentum shifts
- What does the larger timeframe show?
- If daily chart still bullish, hold through intraday pullbacks
- If daily chart reversing, exit intraday positions
Holding Rules
Hold through pullbacks when:
- The trend is strong and intact
- Pullback finds support at logical levels (moving averages, trendlines, previous resistance turned support)
- Volume dries up on pullback (shows selling pressure is exhausted)
- No major reversal signals (engulfing bars, failed breakouts)
Exit when:
- Structure breaks (lower lows in uptrend, higher highs in downtrend)
- Major support/resistance breaks
- Reversal candlestick patterns at key levels
- The reason you entered is no longer valid
Exits
Good traders have two types of exits: planned exits and impromptu exits.
Planned Exits
Profit targets: You set these before entering, based on your analysis.
Common methods:
- Fixed risk-reward: Exit at 2R or 3R
- Support/resistance: Exit at the next major level
- Measured moves: If playing a breakout, target the height of the consolidation pattern
- Time-based: Exit after a set number of days or bars (swing trades)
Time-based exits work because trends don't last forever. Even if price hasn't hit your target, exiting after a set period avoids overtrading in one direction.
Impromptu Exits
Sometimes you exit early, before hitting your target or stop.
Valid reasons for early exit:
- Market structure changes (trend reversal signals)
- Major news event affecting your position
- The setup deteriorates - price action weakens
- You reach a major level and see strong rejection
- Portfolio risk: You're overexposed and need to reduce risk
Invalid reasons for early exit:
- You're bored
- You're up small and want to "lock it in"
- You're scared of giving back profits
- You see a better opportunity elsewhere (FOMO)
Early exits based on fear are usually mistakes. Trust your original plan unless you have a concrete reason to change it.
Managing Through Volatility
Volatility spikes affect trade management. Here's how to adapt:
When Volatility Expands
- Widen stops: Normal stops get hit in volatile conditions
- Reduce position size: Same dollar risk with fewer shares
- Take partial profits earlier: Volatility creates bigger swings, capture them
- Avoid adding to positions: Wait for volatility to normalize
- Tighten trailing stops: Volatility creates reversals, lock in profits when you have them
When Volatility Collapses
- Tighten stops: Narrow ranges mean stops don't need as much room
- Avoid tight profit targets: Range-bound markets make it hard to hit targets
- Be patient: Low volatility precedes expansion. Wait for the breakout
- Reduce trading frequency: Fewer opportunities in slow markets
Managing Through Gaps
Overnight gaps can wreck trades that closed profitable.
Before holding overnight:
- Check if news is scheduled (earnings, Fed announcements, economic data)
- Size your position so a gap won't destroy your account
- Set stop-loss orders (they'll execute on gap open)
- Consider taking partial profits before the close
If a gap goes against you:
- Don't panic. Assess the new information.
- If the gap breaks a major level, exit immediately
- If the gap is minor and your thesis unchanged, hold
- Widen stops temporarily to accommodate increased volatility
If a gap goes in your favor:
- Consider taking partial profits - gaps often reverse (gap fills)
- Move stops to breakeven or trail closely
- Don't add - you're chasing after the move happened
Multiple Position Management
Complex strategies involve managing multiple trades simultaneously.
Portfolio Heat
Portfolio heat is the total risk across all open positions.
Example:
- Account: $100,000
- Trade 1: Risk $1,000
- Trade 2: Risk $1,500
- Trade 3: Risk $500
- Total risk: $3,000
- Portfolio heat: 3%
Keep portfolio heat under 5-6%. If you have 5 positions each risking 1%, your heat is 5%. Adding more trades increases risk without necessarily increasing returns.
Correlation Risk
Two positions in correlated stocks double your risk.
Example:
- You're long NVDA and AMD
- Both are semiconductor stocks
- Tech sector sells off
- Both positions drop simultaneously
Your risk is correlated. You're not diversified.
Check correlations before entering new positions. If you're already exposed to a sector or theme, don't add more exposure.
Trade Management Checklist
Before entering a trade, know:
- Initial stop loss location
- First profit target
- Whether you'll take partial profits or hold for full target
- When you'll start trailing stops
- What price action would cause early exit
- Maximum holding period
- Conditions for adding to position
While in the trade:
- Monitor for weakening momentum
- Watch for structural changes
- Track support/resistance levels
- Adjust stops based on price action
- Take partial profits at planned levels
- Consider adding only if original thesis confirmed
Real-World Example
Trade: Long NVDA at $450, stop at $440, target $490
Day 1: Enter at $450. Stop at $440.
Day 2: NVDA rallies to $460. Move stop to breakeven ($450). No profit taken yet.
Day 3: NVDA hits $470. Take 50% profits at $470 (lock in 1R). Move remainder stop to $460.
Day 4: NVDA pulls back to $465 (above stop). Hold.
Day 5: NVDA breaks out to $480. Move stop to $470 (trail below recent swing low).
Day 6: NVDA hits $490 target. Exit remainder.
Result:
- First half: $20 profit × 50 shares = $1,000 (1R)
- Second half: $40 profit × 50 shares = $2,000 (2R)
- Total: 1.5R on full position
- Risk management: breakeven stop after day 2, trailing stop after day 5
The Bottom Line
Your entry gets you into trades. Trade management gets you out with profits.
Good trade management:
- Protects capital with smart stop placement
- Locks in profits without cutting winners short
- Lets you stay in trends long enough to make meaningful gains
- Reduces emotional decision-making
- Adapt to changing market conditions
Poor trade management:
- Turns winners into losers
- Exits too early or too late
- Ignores risk, chases rewards
- Reacts emotionally instead of following a plan
Learn to manage trades better than you find them, and you'll be profitable regardless of your win rate.
The exit matters more than the entry. Master it.