What you will learn
- Initial protection
- Target logic
- Trailing rules
- Partial exit accounting
Initial protection
Initial protection should reflect the stated invalidation and affordable exposure. Compute quantity from the chosen assumptions before entry. Moving protection farther away solely to avoid recognizing a loss changes the original risk decision.
Target logic
A target is a planned exit condition, not a promised outcome. Define whether it is a fixed distance, a reference area or another observable rule. Costs and actual fill availability affect realized reward-to-risk.
Trailing rules
Trailing rules need a precise update schedule and monotonicity convention where applicable. A backtest must not use an intrabar high to tighten a stop before that high was observed. The price path matters when both updates and triggers occur within one bar.
Partial exit accounting
Partial exits change remaining quantity and realized P&L. Record every execution and cost, then calculate the whole trade consistently. A favorable first exit does not determine the result of the remaining exposure.
Worked example
Two units enter at 100. One exits at 102 and one at 99, multiplier one and no costs. Total gross P&L is 2−1 = 1, not 2. The first partial exit is only part of the trade.
Try it yourself
Repeat with total costs of 0.6 and explain what belongs in the final trade record.
Show the worked solution
Net P&L is 0.4. The record includes both exit quantities and prices, their times and the allocated costs. Reporting only the favorable exit would overstate performance.
Apply this to your course project
Create two contrasting playbooks and replay them on a reserved chart sample.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.