How to Set Entry, Exit Point & Stop Loss in a Trade?

stock chart with indicators

Trading in the share markets can be both exciting and challenging. However, achieving success largely depends on having a well-defined strategy. One essential aspect of any trading plan is determining the entry, exit points, and stop-loss levels. These parameters help traders manage risk, maximize potential profits, and stay disciplined in the face of market fluctuations. Traders can also use swing share trading tips in India for more profit. This article will explore the important steps to effectively set entry and exit points and employ stop-loss orders in your trades.

How to Set Entry, Exit Point, and Stop Loss?

Before setting entry and exit points, it’s imperative to have a trading strategy. Your financial objectives, risk tolerance, and time commitment should all be taken into account while developing this plan. The type of trader you are—day, swing, or long-term investor—should be taken into consideration. Determine the financial instruments you want to trade. Forex, equities, cryptocurrency, or commodities could all be involved. A well-thought-out strategy will be a foundation for making informed decisions about your entry and exit points.

Entry Points

Entry points are essential as they dictate when you initiate a trade. Various methods exist to identify potential entry points:

Technical Analysis:  To spot trends, patterns, support, and resistance levels, use price charts and indicators. Bollinger Bands, Moving Averages, the Relative Strength Index (RSI), and Fibonacci retracements are examples of well-liked technical indicators.

Fundamental Analysis:  Consider the underlying factors affecting the asset’s value, such as earnings reports, economic indicators, geopolitical events, and company news.

Combination:  Many traders employ technical and fundamental analysis for a more comprehensive view of potential entry points.

Exit Points

It is important to determine when to exit a trade. Whether to lock in profits or reduce losses. There are several approaches to setting exit points:

Profit Targets:  Decide on a specific price level or percentage gain that aligns with your trading strategy. This target should be based on the asset’s historical performance, support/resistance levels, or technical indicators.

Trailing Stop: With a trailing stop, the stop-loss level is automatically adjusted to reflect price changes in your favor. This allows you to capture more significant gains while preserving some profits if the market reverses suddenly.

Time-based Exits: Set predefined timeframes for each trade, irrespective of profit or loss. This approach suits traders who prefer to capitalize on short-term opportunities.


Stoploss-a vital risk management tool

Stop-loss orders are vital risk management tools that help protect your capital from major losses. They trigger an automatic sell order when the asset’s price reaches a predetermined level, limiting potential losses.

Risk Tolerance
Risk tolerance refers to an individual trader’s ability and willingness to withstand losses in their trading endeavors. It is a personal evaluation of how much risk one is comfortable taking with trading capital. Setting a precise risk tolerance percentage is vital to avoid excessive losses that could harm your overall trading portfolio.
For example, if your risk tolerance is 2% of your trading capital, that means you are willing to risk a maximum of 2% of your account balance on any trade. This percentage acts as a safety net, helping you manage risk and avoid overexposure to any trade. By setting this limit, you can calculate the appropriate position size and set a stop-loss level that aligns with your risk tolerance.
Volatility Considerations
Volatility measures how much an asset’s price fluctuates over a specific period. Assets with higher volatility experience more significant price swings, while assets with lower volatility tend to have more stable price movements. When considering the appropriate stop-loss level, volatility plays a vital role in determining the breadth of the stop-loss order.
Setting a wider stop-loss level is essential for highly volatile assets to accommodate larger price fluctuations and prevent premature stop-outs. Conversely, less volatile assets may require tighter stop-loss levels since they tend to exhibit smaller price swings and are less likely to trigger the stop-loss prematurely.
Psychological Discipline
Trading in the financial markets can be emotionally challenging, especially during market turbulence or unexpected price movements. Implementing a stop-loss order is a valuable tool to maintain psychological discipline and prevent emotional decision-making.
Without a stop-loss order, traders may be tempted to hold onto a losing position, hoping the market will eventually turn in their favor. This behavior, known as “holding and hoping,” can lead to significant losses and disrupt your overall trading strategy.


Setting entry, exit points, and stop-loss orders is fundamental to successful trading. These parameters structure your trading plan, enabling you to navigate the unpredictable waters of the financial markets with greater confidence and discipline. Keep in mind that trading entails risk and that no method can ensure success. However, with a well-defined plan, swing share trading advice in India, and adherence to risk management principles, you increase your chances of success in the long run. Happy trading!


1)  It’s advisable not to enter/exit beyond the recommended range.
2)  Strictly follow the StopLoss as mentioned. Honour it.
3)  Use trailing StopLoss to retain profits.
4)  Diversify trading capital into our other technical recommendations.
5)  Risk only the money what you can afford to lose. Hedge accordingly.


The research analysis is prepared by Arijit Banerjee, CMT, CFTe. He is a veteran trader and an active investor having in-depth knowledge in financial market research, advanced technical analysis, market cycle, algorithmic trading and portfolio management. Arijit is a Chartered Market Technician (CMT) accredited by CMT Association USA, the leading global authority of Technical Analysis and has been honoured by Certified Financial Technician (CFTe) from the International Federation of Technical Analysts, USA. SEBI, the regulatory body of Indian financial market also recognizes him as a Research Analyst (INH300006582).


The views expressed herein are based solely on information available publicly/internal data/other sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to accuracy. The recommendations provided herein is solely for informational purposes and are not intended to be and must not be taken alone as the basis for an investment/trading decision. Trading and investing are subject to market risk and the securities discussed and opinions expressed herein may not be suitable for all investors. To read the full disclosure, please click here.

Enjoy this recommendation?
Share with your friends

Your return could be much more


access our premium recommendations

Swing Trading Advice

Subscription Period
3 months / 6 months / 12 months
7900 for 3 months*
  • * referred calendar months here
    e.g. Jan 20, 2020 — April 20, 2020

  • top 9-10 trade advice / month
  • average profit 9-10% / advice
  • short to medium term trade
  • ...and other exclusive benefits

Subscribe With Us

Get free Trading tips and Investment advice

We respect your privacy.

You cannot copy content of this page