It is common wisdom among successful traders that you should know when to exit a trade before you open a trade. This is actually the easy part. The difficult question is when you enter the market again after you exited a trade.

Good and Bad Trades

Good trades are trades that are following a profitable trading system. Bad trades are trades that are done on the fly, based on emotions. Good or bad trades have nothing to do with how profitable that single trade was. Good or bad trades are all about trading long-term in a systematic, profitable way.

One other aspect of good trades is that they follow a trading system that is robust or anti-fragile (thanks to Nassim for introducing this term) and that do not blow up at a certain moment. How much use is it to trade profitable for 5 years and then one day wake up and find that you lost all your money since your trading system did not like and could not cope with how the markets behaved?

Tested Exits

Bad exists are fuelled by emotions. Bad exits are driven by the fear of losing more money. Other bad exits are the result of the fear of giving back what you have gained so far.

The only thing worse to a bad exit is to stay in the market without knowing in advance when to exit it.

Good exists can be based on predefined and tested stop-loss levels. Note that these levels must be tested. Otherwise you may never have a profitable trade in your life.

Other good exits can be triggered by the change in direction of tested trend signals. The key here is that these trend signals are tested for many years and in many markets.

Enter the Market after an Exit

It absolutely makes no sense to immediately take a new position in a market after you exited that market just before.

Note that it can absolutely make sense to change your position size for a certain market. That is something different.

But the question that you need to answer for yourself is when to enter a certain market again after you exited your trade in that market completely.

The only sensible answer to that question is that you need to have a trading system that tells you when to enter a market and when to exit that market. These entry and exit points need to be tested over time and back-tested for decades.

Do you know already what would trigger your re-entry to a certain financial market before you exit your ongoing trade in that market?