# Entries, exits & stops

> Every strategy needs a way in and a way out.

Source: https://www.texttoquant.com/academy/entries-exits-stops
Level: Beginner · 5 min · lesson 4 of 12

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An entry rule is only half a strategy. How you exit (a target, a stop, a signal, or a trailing stop) often matters more for the final result than how you got in.

## Three ways out

You can exit on a signal (the opposite of your entry), at a fixed target or stop (a price level), or with a trailing stop (a level that follows price up). Most strategies use a combination: a stop to cap the loss and either a target or a signal to book the win.

## Stops define your risk

The stop loss is where you admit the idea was wrong. It sets the maximum you can lose on the trade, which (as the Risk & Execution track shows) is what lets you size the position sensibly. A strategy without a stop has undefined risk.

## Targets vs letting it run

A fixed take profit raises your win rate but caps big winners. A trailing stop gives back a little at the end of every trade but lets the occasional runner pay for many small losses. This example uses both a stop and a target so you can see the trade off on the chart.

## When the engine asks instead of guessing

'Breaks above the 20-day high' can mean three different rules, so the engine stops and asks which one you meant before it parses. Pick 20-day high: a close above the highest high of the previous 20 days. That pause is the product refusing to choose for you, and it is the same honesty you will lean on when a result looks too good.

## Try it

```
Buy ETH when price breaks above the 20-day high; exit at a 15% take profit or a 7% stop loss, whichever comes first, on 1D, last 3 years.
```

Run it: https://www.texttoquant.com/terminal?q=Buy%20ETH%20when%20price%20breaks%20above%20the%2020-day%20high%3B%20exit%20at%20a%2015%25%20take%20profit%20or%20a%207%25%20stop%20loss%2C%20whichever%20comes%20first%2C%20on%201D%2C%20last%203%20years.&parse=1

**Takeaway:** Design the exit as deliberately as the entry: a stop caps the loss, and the choice between a fixed target and a trailing stop is really a choice about how you want your winners to look.

## Check yourself

What does the stop loss define?

1. The price you expect the trade to reach
2. The most you can lose on the trade, which is what lets you size it
3. The moment the trend has ended

Answer: 2. The stop is where you admit the idea was wrong. Its distance sets the maximum loss, and the Risk track turns that into position size.

Terms used: [breakout](https://www.texttoquant.com/academy/glossary#breakout), [take-profit](https://www.texttoquant.com/academy/glossary#take-profit), [trailing-stop](https://www.texttoquant.com/academy/glossary#trailing-stop), [atr-stop](https://www.texttoquant.com/academy/glossary#atr-stop)