Targets & Stop-Loss
Profit Targets and Stop-Losses are the hard boundaries of your exit strategy. They define the exact price points at which your strategy automatically takes profits or cuts losses.
Unit Types
All targets and stop-losses can be expressed in three unit types:
| Unit | What It Measures | Example |
|---|---|---|
| PnL | Absolute currency value (₹) | Target at +₹5,000 / SL at -₹2,000 |
| Points | Index or instrument points | Target at +50 pts / SL at -25 pts |
| % ROI | Percentage return on capital/margin | Target at +5% / SL at -2% |
Choosing a Unit
- PnL (₹) — Best when you think in absolute rupee terms and manage fixed capital
- Points — Best for index strategies where point movements are intuitive
- % ROI — Best for comparing performance across strategies with different capital requirements
Profit Targets
Single Target
The simplest configuration — one profit target that closes the entire position (or leg) when reached.
Target: +₹5,000 (PnL)
P&L reaches +₹5,000 → Entire position CLOSED → Profit booked ✅Multiple Targets (Scale-Out Exits)
This is where the exit strategy becomes truly powerful. Instead of a single all-or-nothing exit, you can define multiple target levels with specific lot quantities at each step.
Target 1: +20 Points → Exit 50% of lots (Book partial profits)
Target 2: +40 Points → Exit 30% of lots (Book more profits)
Target 3: +80 Points → Exit remaining 20% (Maximum extraction)How Scale-Outs Work
| Event | Lots Open | Action | Lots Remaining |
|---|---|---|---|
| Entry | 10 lots | — | 10 lots |
| T1 hit (+20 pts) | 10 lots | Exit 5 lots (50%) | 5 lots |
| T2 hit (+40 pts) | 5 lots | Exit 3 lots (30%) | 2 lots |
| T3 hit (+80 pts) | 2 lots | Exit 2 lots (remaining) | 0 lots |
The Trading Edge
Scaling out is one of the most effective psychological tools in trading. By booking half your profits early at T1, you’ve already paid for your risk — the remaining position is essentially a “free ride.”
This eliminates the anxiety of watching unrealized profits evaporate, while still giving the trade room to reach its full potential on the remaining lots.
Stop-Loss
The maximum acceptable loss before the strategy forcefully closes the position.
Configuration
| Parameter | Description |
|---|---|
| Value | The loss threshold (e.g., -₹3,000 or -30 points) |
| Unit | PnL, Points, or % ROI |
Behavior
Stop-Loss: -₹3,000
P&L drops to -₹3,000 → Entire position CLOSED → Loss limited ✅Stop-Loss Evaluation
Stop-losses evaluate on live ticks, not candle closes. The moment your P&L breaches the threshold — even mid-candle — the exit order is placed immediately. This ensures maximum protection during flash crashes and sudden volatility spikes.
Risk/Reward Planning
Use targets and stop-losses together to define your strategy’s risk/reward ratio:
| Setup | Target | Stop-Loss | Risk:Reward |
|---|---|---|---|
| Conservative | +₹5,000 | -₹5,000 | 1:1 |
| Moderate | +₹5,000 | -₹2,500 | 1:2 |
| Aggressive | +₹10,000 | -₹2,000 | 1:5 |
Professional Approach
Professional traders typically target a minimum 1:2 risk-reward ratio. This means even with a 40% win rate, the strategy remains profitable:
- 40 wins × ₹5,000 = +₹200,000
- 60 losses × ₹2,500 = -₹150,000
- Net: +₹50,000 (profitable despite losing more often than winning)
Next Steps
Take your exits to the next level with dynamic trailing stop-losses:
→ Next: Trailing Stop-Loss