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Two exit families

Most exit rules fall into two families:
  1. Percent-based exits
    • fixed TP/SL (e.g. TP 6%, SL 1%)
    • simple, deterministic, predictable
  2. Logic-based exits
    • indicator exits (e.g. trend flips, crosses)
    • structure exits (e.g. break of swing low)
    • time exits (e.g. close at session end)
Both are valid - and many good strategies use both.

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Percent-based exits (TP/SL)

Percent exits define targets relative to entry price. Examples: 
Exit long with TP 7% and SL 1%.
Exit short with TP 6% and SL 1%.
Strengths:
  • clear risk boundaries
  • easy to understand and compare
  • robust across market noise (if sized correctly)
Weaknesses:
  • can cut winners early in strong trends
  • can fail to adapt to volatility changes
  • may not match market structure

Take profit & stop loss

Learn TP/SL behavior and best practices.

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Logic-based exits

Logic exits use conditions, not fixed percentages. Examples: 
Exit long when EMA(20) crosses below EMA(50).
Exit short when Supertrend changes to buy.
Close any open position at 23:00 UTC.
Strengths:
  • adapts to trend continuation
  • can match market structure
  • can reduce unnecessary exits
Weaknesses:
  • can be slower (late exit)
  • can increase drawdowns if not protected
  • requires careful validation

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Which should you choose?

A practical heuristic: Use percent exits when:
  • you want predictable risk
  • you are testing early iterations quickly
  • you trade noisy / low timeframes
  • you want strict downside control
Use logic exits when:
  • you want to let winners run in trends
  • you need structure-based behavior
  • you want exits aligned with regime changes
  • you want strategy behavior to adapt

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The common best practice: combine both

Many strong strategies do this:
  • Primary exit = logic-based (captures trend behavior)
  • Safety layer = stop loss (prevents tail losses)
  • optional TP = take profit cap (prevents overstay)
Example: 
Exit long when trend flips bearish,
but enforce SL 1% and TP 6%.
How it behaves:
  • if trend exit triggers first → exits by logic
  • if SL triggers first → exits by protection
  • if TP triggers first → locks profit early
When multiple exits exist, the earliest triggered exit closes the trade.

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Timeframe sensitivity

Exit selection depends strongly on timeframe.
  • lower timeframe → percent exits tend to work better (noise control)
  • higher timeframe → logic exits often improve trend capture
A logic exit on 5m can become a drawdown machine if not protected.

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Why your results may “not match expectations”

If you expected logic exits to control behavior but see many exits by TP/SL:
  • TP/SL triggers earlier than logic exits
  • TP/SL is too tight for timeframe volatility
  • the strategy is not trending enough
If you expected tight risk control but see deep drawdowns:
  • logic exit is too slow
  • no protective SL exists
  • volatility regime changed

How to read results

Use the correct workflow to diagnose outcomes.

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Common mistakes

High win rate illusions often collapse because one tail loss wipes the curve.
Trend exits can be late. Without SL you may accumulate large drawdowns.
The strategy becomes a stop-out machine and never reaches logic exits.
You must compare risk (drawdown) and stability, not just PnL.

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Best practices

  • Define your exit intent: cap profit vs follow trend
  • Always include a stop loss unless you have a strong reason not to
  • Tune TP/SL to timeframe volatility (not preference)
  • Inspect the biggest wins/losses to see which exit type dominates

Exit logic

All exit types and how to structure them.

Take profit & stop loss

Fixed percent exits explained.

Metrics explained

See exit impact in metrics.

Common pitfalls

Exit mistakes that distort backtests.
Percent exits control risk.
Logic exits control behavior.
The best strategies usually need both.