Once your conditions decide when to act, execution settings decide how. This is where a signal becomes an actual order with defined risk.
Order types#
How the order reaches the market:
- Market — fills immediately at the best available price. Certain fill, uncertain price.
- Limit — fills only at your price or better. Certain price, uncertain fill.
- Stop / stop-market — becomes a market order once a trigger price is hit.
- Stop-limit — becomes a limit order once triggered.
Position sizing#
How much the trade commits:
- Fixed amount — a set quantity or notional per trade.
- Percentage of account — size scales with your balance (the common risk-based approach; see Risk Management Basics).
- Leverage — an optional multiplier on futures. It increases gains and losses equally and moves your liquidation price closer. Use conservatively.
Stop-loss#
The predefined exit that caps a losing trade. Set it by:
- Percentage — a fixed % from entry.
- Price level — an absolute price.
- Volatility-based — a distance derived from recent range (e.g. an ATR multiple).
Together with position size, the stop determines your real dollar risk per trade.
Take-profit#
The exit that locks in a win at a target — set by percentage, price level, or a reward-to-risk ratio relative to your stop.
Trailing stops#
A trailing stop follows price as the trade moves in your favour, locking in more of the gain while leaving room to run. If price reverses by the trailing distance, the position closes. Useful for trend strategies where you don't want to cap the upside with a fixed target.
Partial exits#
Instead of closing all at once, partial exits (or scaling out) close a portion of the position at each of several targets — for example, take 50% at the first target and let the rest ride behind a trailing stop. This banks profit early while keeping exposure to a larger move.
Next#
With conditions and execution defined, walk through complete builds in Strategy Examples, then validate them in Testing a Strategy.