How to Setup Exit Conditions

Problem

You need to define precise rules for when your algorithm should exit trades to protect profits and limit losses. Proper exit conditions are crucial for risk management and maximizing returns.

Prerequisites

• Basic algorithm configuration completed (Step 1)
• Position sizing configured (Step 2)
• Entry conditions configured (Step 3)
• Understanding of risk management principles

Exit Priority Order

When multiple exit conditions are met simultaneously, only the first one in priority order executes:

1. Opposite Signal - Reverse position
2. Partial Exits - Scale out at targets
3. Break-even Stop - Move stop to entry
4. Stop Loss - Limit losses
5. Trailing Stop - Lock in profits
6. Take Profit - Realize gains
7. Time Exit - Close after duration

Stop Loss Types

1. Fixed Stop Loss

Exit at a specific price level.

{
  "exitConditions": {
    "stopLoss": {
      "type": "fixed",
      "price": 495
    }
  }
}

When to Use:

• Support/resistance levels
• Specific price targets
• Manual risk management

Example:

• Entry: ₹500
• Stop Loss: ₹495
• Risk: ₹5 per share

2. Percentage Stop Loss

Exit when price moves against you by a percentage.

{
  "exitConditions": {
    "stopLoss": {
      "type": "percentage",
      "percentage": 2.0
    }
  }
}

Calculation:

Long Position:

Stop Price = Entry Price × (1 - Stop %)

Short Position:

Stop Price = Entry Price × (1 + Stop %)

Examples:

Long Position:

• Entry: ₹500
• Stop: 2%
• Stop Price: ₹500 × (1 - 0.02) = ₹490
• Risk: ₹10 per share

Short Position:

• Entry: ₹500
• Stop: 2%
• Stop Price: ₹500 × (1 + 0.02) = ₹510
• Risk: ₹10 per share

Recommended Percentages by Volatility:

Volatility	Stop %	Use Case
Low	1-2%	Large caps, stable stocks
Medium	2-3%	Mid caps, normal volatility
High	3-5%	Small caps, volatile stocks

3. ATR-Based Stop Loss

Dynamic stop based on Average True Range (volatility).

{
  "exitConditions": {
    "stopLoss": {
      "type": "atr",
      "atrPeriod": 14,
      "atrMultiplier": 2.0
    }
  }
}

Calculation:

Stop Distance = ATR(period) × Multiplier
Stop Price = Entry Price ± Stop Distance

Examples:

Low Volatility (ATR = ₹5):

• Entry: ₹500
• ATR: ₹5
• Multiplier: 2.0
• Stop Distance: ₹5 × 2.0 = ₹10
• Stop Price: ₹490 (long) or ₹510 (short)

High Volatility (ATR = ₹25):

• Entry: ₹500
• ATR: ₹25
• Multiplier: 2.0
• Stop Distance: ₹25 × 2.0 = ₹50
• Stop Price: ₹450 (long) or ₹550 (short)

ATR Period Selection:

• 14 periods (default): Standard, balanced
• 20 periods: Smoother, less sensitive
• 10 periods: More responsive

ATR Multiplier Effects:

• 1.5: Tighter stops, more stopped out
• 2.0: Balanced (recommended)
• 2.5: Wider stops, fewer false stops
• 3.0: Very wide, for trending markets

Advantages:

• Adapts to market volatility
• Wider stops in volatile markets
• Tighter stops in calm markets
• Reduces false stops

4. Indicator-Based Stop Loss

Use technical indicators as dynamic stops.

{
  "exitConditions": {
    "stopLoss": {
      "type": "indicator",
      "indicator": "EMA",
      "period": 20
    }
  }
}

Common Indicators:

Moving Average Stop:

{
  "stopLoss": {
    "type": "indicator",
    "indicator": "EMA",
    "period": 20
  }
}

• Long: Exit if price closes below EMA(20)
• Short: Exit if price closes above EMA(20)

Parabolic SAR Stop:

{
  "stopLoss": {
    "type": "indicator",
    "indicator": "ParabolicSAR"
  }
}

• Automatically adjusts with price movement
• Excellent for trending markets

Bollinger Band Stop:

{
  "stopLoss": {
    "type": "indicator",
    "indicator": "Bollinger_Middle",
    "period": 20
  }
}

• Exit if price crosses middle band

When to Use:

• Trend-following strategies
• Dynamic risk management
• Letting winners run

Update Frequency:

• Stops update every candle close
• Never moves against you (only in your favor)

Take Profit Types

1. Fixed Take Profit

Exit at a specific price level.

{
  "exitConditions": {
    "takeProfit": {
      "type": "fixed",
      "price": 520
    }
  }
}

When to Use:

• Resistance levels
• Round numbers
• Specific targets

Example:

• Entry: ₹500
• Take Profit: ₹520
• Profit: ₹20 per share (4%)

2. Percentage Take Profit

Exit when profit reaches a percentage.

{
  "exitConditions": {
    "takeProfit": {
      "type": "percentage",
      "percentage": 5.0
    }
  }
}

Calculation:

Long Position:

Target Price = Entry Price × (1 + Profit %)

Short Position:

Target Price = Entry Price × (1 - Profit %)

Examples:

Long Position:

• Entry: ₹500
• Target: 5%
• Target Price: ₹500 × 1.05 = ₹525
• Profit: ₹25 per share

Short Position:

• Entry: ₹500
• Target: 5%
• Target Price: ₹500 × 0.95 = ₹475
• Profit: ₹25 per share

Typical Percentages:

Strategy	Target %	Holding Period
Scalping	0.5-1%	Minutes
Day Trading	1-3%	Hours
Swing Trading	3-10%	Days
Position Trading	10-30%	Weeks/Months

3. Risk-Reward Based Take Profit

Calculate take profit based on stop loss distance.

{
  "exitConditions": {
    "takeProfit": {
      "type": "risk_reward",
      "ratio": 2.0
    },
    "stopLoss": {
      "type": "percentage",
      "percentage": 2.0
    }
  }
}

Calculation:

Profit Target = Stop Loss Distance × Risk-Reward Ratio

Examples:

1:2 Risk-Reward:

• Entry: ₹500
• Stop Loss: 2% (₹490)
• Risk: ₹10
• Ratio: 2.0
• Profit Target: ₹10 × 2 = ₹20
• Target Price: ₹520 (4% profit)

1:3 Risk-Reward:

• Entry: ₹500
• Stop Loss: 2% (₹490)
• Risk: ₹10
• Ratio: 3.0
• Profit Target: ₹10 × 3 = ₹30
• Target Price: ₹530 (6% profit)

Recommended Ratios:

Ratio	Win Rate Needed	Use Case
1:1	50%+	High win rate strategies
1:2	35%+	Balanced (recommended)
1:3	25%+	Trend-following
1:4	20%+	Strong trends only

4. Trailing Take Profit

Take profit that moves with price (rarely used, trailing stop is better).

{
  "exitConditions": {
    "takeProfit": {
      "type": "trailing",
      "trailPercentage": 2.0,
      "activationThreshold": 3.0
    }
  }
}

How It Works:

• Activates after 3% profit
• Trails 2% behind peak price
• Exits if price drops 2% from peak

Note: Trailing stops are more commonly used for this purpose.

5. Multiple Targets (Partial Exits)

Scale out at different profit levels.

{
  "exitConditions": {
    "takeProfit": {
      "type": "multiple_targets",
      "targets": [
        {
          "percentage": 2.0,
          "exitPercentage": 33
        },
        {
          "percentage": 4.0,
          "exitPercentage": 33
        },
        {
          "percentage": 6.0,
          "exitPercentage": 34
        }
      ]
    }
  }
}

See Partial Exits section for details.

Trailing Stops

Lock in profits while letting winners run.

Percentage-Based Trailing

{
  "exitConditions": {
    "trailingStop": {
      "enabled": true,
      "type": "percentage",
      "trailPercentage": 2.0,
      "activationThreshold": 3.0
    }
  }
}

How It Works:

1. Activation: Trailing starts after 3% profit
2. Tracking: System tracks peak price
3. Trailing: Stop trails 2% behind peak
4. Exit: Triggers if price drops 2% from peak

Example:

Event	Price	Peak	Stop	Status
Entry	₹500	-	₹490 (2% fixed)	Initial stop
+2% profit	₹510	-	₹490	Not activated yet
+3% profit	₹515	₹515	₹504.70	Activated! (2% trail)
+5% profit	₹525	₹525	₹514.50	Stop moved up
+7% profit	₹535	₹535	₹524.30	Stop moved up
Pullback	₹530	₹535	₹524.30	Still in trade
Pullback	₹524	₹535	₹524.30	Exit triggered!

Final Result: Entered at ₹500, exited at ₹524 = 4.8% profit (locked in most of the 7% move)

ATR-Based Trailing

{
  "exitConditions": {
    "trailingStop": {
      "enabled": true,
      "type": "atr",
      "atrPeriod": 14,
      "atrMultiplier": 2.0,
      "activationThreshold": 2.0
    }
  }
}

Advantages:

• Adapts to volatility
• Wider trail in volatile markets
• Tighter trail in calm markets

Example:

Low Volatility (ATR = ₹5):

• Peak: ₹525
• ATR: ₹5
• Multiplier: 2.0
• Trail Distance: ₹10
• Stop: ₹515

High Volatility (ATR = ₹15):

• Peak: ₹525
• ATR: ₹15
• Multiplier: 2.0
• Trail Distance: ₹30
• Stop: ₹495

Activation Threshold

{
  "trailingStop": {
    "activationThreshold": 3.0  // Start trailing after 3% profit
  }
}

Why Use Activation Threshold:

• Prevents premature trailing
• Lets position breathe initially
• Only trails when in profit

Recommended Thresholds:

Strategy	Threshold	Reason
Scalping	0.5-1%	Quick profits
Day Trading	1-2%	Small moves
Swing Trading	2-5%	Larger moves
Position Trading	5-10%	Major trends

Trailing Stop Best Practices

1. Set activation threshold - Don't trail immediately
2. Match to volatility - Use ATR for volatile stocks
3. Don't trail too tight - Give room for normal pullbacks
4. Combine with take profit - Partial exit + trailing stop

Partial Exits

Scale out of positions at multiple profit levels.

Configuration

{
  "exitConditions": {
    "partialExits": {
      "enabled": true,
      "targets": [
        {
          "profitPercentage": 2.0,
          "exitPercentage": 33,
          "moveStopTo": "breakeven"
        },
        {
          "profitPercentage": 4.0,
          "exitPercentage": 33,
          "moveStopTo": "entry_plus_1"
        },
        {
          "profitPercentage": 6.0,
          "exitPercentage": 34,
          "moveStopTo": null
        }
      ]
    }
  }
}

How It Works

Initial Position: 300 shares at ₹500

Target 1 (2% profit - ₹510):

• Exit: 33% = 100 shares
• Remaining: 200 shares
• Move stop to breakeven (₹500)

Target 2 (4% profit - ₹520):

• Exit: 33% = 100 shares
• Remaining: 100 shares
• Move stop to entry + 1% (₹505)

Target 3 (6% profit - ₹530):

• Exit: 34% = 100 shares
• Remaining: 0 shares
• Position closed

Profit Targets

{
  "targets": [
    { "profitPercentage": 2.0 },  // First target
    { "profitPercentage": 4.0 },  // Second target
    { "profitPercentage": 6.0 }   // Third target
  ]
}

Common Patterns:

Conservative (2%, 4%, 6%):

• Quick profits
• Reduces risk fast
• Good for choppy markets

Moderate (3%, 6%, 9%):

• Balanced approach
• Standard spacing
• Most common

Aggressive (5%, 10%, 15%):

• Lets winners run
• Higher risk
• Trending markets only

Exit Percentages

{
  "targets": [
    { "exitPercentage": 33 },  // Exit 1/3
    { "exitPercentage": 33 },  // Exit 1/3
    { "exitPercentage": 34 }   // Exit remaining
  ]
}

Common Patterns:

Equal Thirds (33%, 33%, 34%):

• Balanced scaling
• Most common

Front-Loaded (50%, 30%, 20%):

• Lock in profits quickly
• Reduce risk fast

Back-Loaded (20%, 30%, 50%):

• Let winners run
• Higher risk

Move Stop To

{
  "targets": [
    { "moveStopTo": "breakeven" },      // Move to entry price
    { "moveStopTo": "entry_plus_1" },   // Move to entry + 1%
    { "moveStopTo": "entry_plus_2" }    // Move to entry + 2%
  ]
}

Options:

• null: Don't move stop
• "breakeven": Move to entry price
• "entry_plus_1": Move to entry + 1%
• "entry_plus_2": Move to entry + 2%
• "entry_plus_3": Move to entry + 3%

Strategy:

• First target: Move to breakeven (risk-free)
• Second target: Lock in small profit
• Third target: Let remaining run

Hit Targets Tracking

System tracks which targets have been hit:

{
  "hitTargets": [true, true, false]
}

• Target 1: ✅ Hit
• Target 2: ✅ Hit
• Target 3: ❌ Not hit yet

Remaining Position Management

After partial exits, remaining position continues with:

• Original stop loss (or moved stop)
• Trailing stop (if enabled)
• Remaining take profit targets

Break-Even Stop

Automatically move stop to entry price after profit threshold.

{
  "exitConditions": {
    "breakEvenStop": {
      "enabled": true,
      "triggerProfit": 1.0,
      "offset": 0.1
    }
  }
}

How It Works:

1. Trigger: After 1% profit
2. Move Stop: To entry + 0.1% (safety buffer)
3. Result: Risk-free trade

Example:

• Entry: ₹500
• Initial Stop: ₹490 (2% stop loss)
• Price reaches: ₹505 (1% profit)
• Stop moves to: ₹500.50 (entry + 0.1%)
• Now risk-free!

Offset Purpose:

• Prevents stop from being exactly at entry
• Avoids exit on minor pullback to entry
• 0.1% buffer is standard

Recommended Settings:

Strategy	Trigger	Offset
Scalping	0.5%	0.05%
Day Trading	1%	0.1%
Swing Trading	2%	0.2%

Exit on Opposite Signal

Close position when opposite entry signal occurs.

{
  "exitConditions": {
    "exitOnOppositeSignal": {
      "enabled": true,
      "closeImmediately": true
    }
  }
}

How It Works:

Long Position:

• Holding long position
• Short entry signal triggers
• Close long immediately
• Optionally enter short

Short Position:

• Holding short position
• Long entry signal triggers
• Close short immediately
• Optionally enter long

Close Immediately Options:

{
  "closeImmediately": true   // Market order, instant exit
}

{
  "closeImmediately": false  // Wait for next candle close
}

When to Use:

• Reversal strategies
• Mean reversion
• Oscillating markets
• Quick direction changes

Example:

{
  "entryConditions": {
    "positionType": "both",
    "longConditions": [
      { "indicator": "RSI", "comparison": "below", "value": 30 }
    ],
    "shortConditions": [
      { "indicator": "RSI", "comparison": "above", "value": 70 }
    ]
  },
  "exitConditions": {
    "exitOnOppositeSignal": {
      "enabled": true,
      "closeImmediately": true
    }
  }
}

• Long when RSI < 30
• Exit long when RSI > 70
• Enter short when RSI > 70
• Exit short when RSI < 30

Time-Based Exits

Close positions after a maximum hold time.

{
  "exitConditions": {
    "timeBasedExit": {
      "enabled": true,
      "maxHoldMinutes": 240
    }
  }
}

Examples:

// Scalping (5-30 minutes)
{
  "maxHoldMinutes": 30
}

// Day Trading (1-4 hours)
{
  "maxHoldMinutes": 240
}

// Swing Trading (1-5 days)
{
  "maxHoldMinutes": 7200  // 5 days
}

When to Use:

• Intraday strategies (must close by EOD)
• Time-decay strategies (options)
• Prevent overnight risk
• Scalping strategies

Partial Time Exits

Exit portions of position over time:

{
  "exitConditions": {
    "timeBasedExit": {
      "enabled": true,
      "partialExits": [
        {
          "minutes": 60,
          "exitPercentage": 50
        },
        {
          "minutes": 120,
          "exitPercentage": 50
        }
      ]
    }
  }
}

• After 1 hour: Exit 50%
• After 2 hours: Exit remaining 50%

Complete Exit Configuration Examples

Example 1: Conservative Day Trading

{
  "exitConditions": {
    "stopLoss": {
      "type": "percentage",
      "percentage": 1.5
    },
    "takeProfit": {
      "type": "risk_reward",
      "ratio": 2.0
    },
    "breakEvenStop": {
      "enabled": true,
      "triggerProfit": 1.0,
      "offset": 0.1
    },
    "timeBasedExit": {
      "enabled": true,
      "maxHoldMinutes": 240
    }
  }
}

Logic:

• 1.5% stop loss
• 3% take profit (1:2 risk-reward)
• Move to breakeven after 1% profit
• Close after 4 hours

Example 2: Swing Trading with Partial Exits

{
  "exitConditions": {
    "stopLoss": {
      "type": "atr",
      "atrPeriod": 14,
      "atrMultiplier": 2.0
    },
    "partialExits": {
      "enabled": true,
      "targets": [
        {
          "profitPercentage": 3.0,
          "exitPercentage": 33,
          "moveStopTo": "breakeven"
        },
        {
          "profitPercentage": 6.0,
          "exitPercentage": 33,
          "moveStopTo": "entry_plus_2"
        },
        {
          "profitPercentage": 9.0,
          "exitPercentage": 34,
          "moveStopTo": null
        }
      ]
    },
    "trailingStop": {
      "enabled": true,
      "type": "percentage",
      "trailPercentage": 3.0,
      "activationThreshold": 5.0
    }
  }
}

Logic:

• ATR-based stop (adapts to volatility)
• Scale out at 3%, 6%, 9%
• Move stop to breakeven, then entry+2%
• Trailing stop activates after 5% profit

Example 3: Trend Following with Trailing Stop

{
  "exitConditions": {
    "stopLoss": {
      "type": "indicator",
      "indicator": "EMA",
      "period": 20
    },
    "trailingStop": {
      "enabled": true,
      "type": "atr",
      "atrPeriod": 14,
      "atrMultiplier": 2.5,
      "activationThreshold": 3.0
    },
    "exitOnOppositeSignal": {
      "enabled": true,
      "closeImmediately": false
    }
  }
}

Logic:

• EMA(20) as initial stop
• ATR trailing stop after 3% profit
• Exit on opposite signal

Verification

After configuring exit conditions, verify:

1. Stop loss is appropriate

   • Not too tight (false stops)
   • Not too wide (excessive risk)
   • Matches volatility

2. Take profit is realistic

   • Based on historical moves
   • Risk-reward ratio is favorable
   • Achievable in timeframe

3. Trailing stop settings

   • Activation threshold is reasonable
   • Trail distance allows for pullbacks
   • Matches strategy style

4. Partial exits make sense

   • Targets are achievable
   • Exit percentages are balanced
   • Stop management is logical

5. Priority order is correct

   • Most important exits have priority
   • No conflicts between exits

Troubleshooting

Stopped Out Too Often

Problem: Stop loss triggers frequently.

Solutions:

1. Widen stop loss percentage
2. Use ATR-based stops (adapts to volatility)
3. Increase ATR multiplier
4. Use indicator-based stops
5. Add confirmation candles to entries

Never Hitting Take Profit

Problem: Take profit targets are never reached.

Solutions:

1. Reduce take profit percentage
2. Use partial exits (scale out)
3. Implement trailing stops
4. Check if targets are realistic
5. Analyze historical price moves

Trailing Stop Too Tight

Problem: Trailing stop exits too early.

Solutions:

1. Increase trail percentage
2. Use ATR-based trailing
3. Increase ATR multiplier
4. Raise activation threshold
5. Give more room for pullbacks

Partial Exits Not Executing

Problem: Partial exit targets never hit.

Solutions:

1. Reduce profit percentages
2. Check if targets are realistic
3. Verify position size is divisible
4. Ensure targets are in correct order

Break-Even Stop Triggered Immediately

Problem: Stop moves to breakeven and exits immediately.

Solutions:

1. Increase trigger profit threshold
2. Add larger offset (0.2-0.5%)
3. Wait for more profit before moving stop
4. Use trailing stop instead

Related

• How to Implement Trailing Stops
• How to Setup Partial Exits
• How to Configure Risk Parameters
• Understanding Risk Management
• Exit Conditions Schema Reference