A comparison of three ways to exit a scalp

[Fairman]

A comparison of three ways to exit a scalp

Exits get less attention than entries and often decide the result.

A fixed target and fixed stop are the simplest. The trade ends when price hits either. Results are predictable and the statistics are clean. The downside is rigidity: a trade that has stalled halfway sits open until the market decides.

A time-based exit closes the trade after a set number of seconds or minutes. It limits exposure and cuts losers that go nowhere. It also cuts winners that were about to work.

A trailing exit follows price, locking in gains as they develop. It captures bigger moves but gives back part of the profit and suffers when ticks are noisy. In thin markets a trailing stop gets hit by spread-driven wiggles.

Combining them is common: a fixed stop, a target, and a time limit. The strategy that fits depends on the entry type. Momentum entries often suit trailing. Reversion entries often suit fixed targets and time limits.

Backtesting each exit on the same entries shows which is best. The result often surprises.

Which exit method does the strategy use, and was it ever tested against alternatives on the same entries?