Exit Point

AAA

DEFINITION of 'Exit Point'

The price at which an investor sells an investment. The exit point is usually decided as part of a premeditated trading strategy meant to mitigate investment risk and take the emotion out of trade decisions. Exit strategies are used by virtually all finance professionals and are a key component to successful trades.

INVESTOPEDIA EXPLAINS 'Exit Point'

For example, an investor decides to buy 100 shares of XYZ stock at $33. Before purchasing the shares, he decides that he will sell if the price drops to $30 a share. This way, he knows in advance that his maximum loss, or his risk, will be limited to $300, or a 9% loss. The investor would also choose an exit point for an increase in the stock's price, say, $40. Deciding in advance can help save an investor from holding on too long in either direction. On the other hand, many investors consider it a bad practice to sell if a company's fundamental situation hasn't weakened.



RELATED TERMS
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches ...
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  3. Entry Point

    The price at which an investor buys an investment. The entry ...
  4. Stop Order

    An order to buy or sell a security when its price surpasses a ...
  5. Exit Strategy

    1. The method by which a venture capitalist or business owner ...
  6. Hard Stop

    A price level that, if reached, will trigger an order to sell ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Trading Strategies

    Patience Is A Trader's Virtue

    Waiting may be the biggest key to reeling in that trophy investment.
  2. Active Trading Fundamentals

    A Look At Exit Strategies

    Setting appropriate exit points should help you avoid taking premature profits or running losses.
  3. Active Trading

    An Introduction To Oscillators

    Find out how this indicator may help improve the average investor's entry and exit points.
  4. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  5. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 12000 set up special trading opportunities that take advantage of shifting crowd psychology.
  6. Bonds & Fixed Income

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
  7. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  8. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  9. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  10. Trading Strategies

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center