The Exit Strategy Most Traders Get Completely Wrong

by Kane Shieh | Oct 2, 2026

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There’s a critical moment in every trade that separates disciplined traders from emotional ones — and it’s not the entry.

It’s knowing when to close the position.

Most traders approach exits with rigid rules: Hit the profit target and get out, or hold until expiration. But that kind of black-and-white thinking can leave money on the table. The better approach is to combine a clear plan with the flexibility to respond to price action, momentum and time decay.

This discipline becomes even more important after a string of losses.

Traders aren’t defined by whether they encounter a slump — they’re defined by how they respond to it. Abandoning a proven strategy or forcing an exit out of fear can turn a temporary setback into a lasting problem.

Reading Momentum Instead of Just Hitting Targets

In this example, I’m managing a bearish options trade designed to gain value if the underlying price falls. Like any options trade, it carries risk. The goal is to control that risk while deciding whether momentum and time decay justify keeping the trade open.

If the underlying reaches $770 by Monday without strong upward momentum, I may hold the trade for a few more days rather than automatically closing it. When momentum isn’t pushing the price aggressively higher, additional time decay may continue to benefit the position.

That makes the profit target a checkpoint rather than an automatic finish line.

Real-time market structure also matters. The underlying price is holding near its 50-day moving average, which could produce a small bounce over the next several sessions.

But a bounce alone doesn’t necessarily invalidate the bearish setup. I don’t expect a move above $777 without a stronger catalyst, so the speed and strength of any rebound will help determine whether to exit or remain patient.

If the underlying reaches the target with weak momentum, holding may allow time decay to keep working. If upward momentum strengthens and price begins pushing decisively higher, that’s a different signal — and a reason to close the trade and move on.

A Flexible Framework Built on Discipline

I’ll most likely close this trade on Monday and take profits. If there’s good profit sooner, I’ll close it and look for another opportunity. But if the setup remains favorable and momentum hasn’t shifted, there’s no reason to force an exit simply because the trade touched a predetermined number.

That flexibility isn’t the same as improvising. The underlying strategies have proven themselves over time. A difficult stretch doesn’t mean the framework has stopped working — sometimes you simply have to manage risk, stay consistent and work through the slump without letting frustration dictate your decisions.

The goal is to build positions that limit downside while preserving upside optionality. That lets you remain patient when momentum is weak, and decisive when it becomes strong.

Next time you’re sitting on a profitable trade, ask yourself: Am I closing because the setup is finished, or simply because price reached a number? That distinction can change everything.

Kane Shieh
Kane Shieh Trading

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