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. Exit Strategy

    1. The method by which a venture capitalist or business owner ...
  5. Stop Order

    An order to buy or sell a security when its price surpasses a ...
  6. Hard Stop

    A price level that, if reached, will trigger an order to sell ...
RELATED FAQS
  1. What are the requirements for being a Public Limited Company?

    The requirements for an entity to be considered a public limited company (PLC) include registration requirements, establishing ... Read Full Answer >>
  2. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  3. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  4. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  5. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  6. When does the holding period on a stock dividend start?

    The holding period on a stock dividend typically begins the day after it is purchased. Understanding the holding period is ... Read Full Answer >>
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. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.
  5. Options & Futures

    How to Make Money by Trading Index Options

    Index options are less volatile and more liquid than regular options. Understand how to trade index options with this simple introduction.
  6. Fundamental Analysis

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  7. Options & Futures

    How To Hedge Put Options Using Binary Options

    Want to hedge your plain vanilla long put option position with binary call options? We show you how.
  8. Options & Futures

    How To Hedge Stock Positions Using Binary Options

    Here’s a step-by-step method to hedge your long (and short) positions in stocks, using binary options.
  9. Trading Strategies

    Microsoft's Game of Catch-Up With The Dow

    Microsoft (MSFT) underperformed the Dow Jones Industrial Average during the 2002 to 2007 bull market, but it has played catch-up in recent years.
  10. Professionals

    Target-Date vs. Index Funds: Is One Better?

    Target-date and index funds are difficult to compare because they differ in both structure and objective, though investors can compare two specific funds.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!