What does the plan say about size and exit?

The last question is about the part of the trade that happens after the order fills, and it is answered before the order is sent. How much. How to add, if at all. Where to take profit. When to leave if nothing happens. And how to write it down so the next trade is a little better. None of it is exciting; all of it decides whether the first six questions ever pay you.

Size by risk, not by dollars in the trade

Decide, once, the most you are willing to lose on a single trade as a fraction of the account. One percent is a common and sensible number; half a percent if you are new. That figure is the only input to size. For shares, divide it by the distance from entry to stop and you have the number of shares. For a defined-risk options structure, the most you can lose per contract is known, and the number of contracts is the risk figure divided by that, rounded down. If the rounding gives you zero, the trade is too big for the account. Pass, or find a structure with a smaller maximum loss.

A wide stop means fewer shares. A tight stop means more. The dollar amount at risk is the same every time, so a losing streak is a known, survivable cost instead of a surprise. The trader who "just buys 100 shares" of everything risks a different amount on every trade without knowing it.

Scaling

Scaling in is optional and simple if you do it: half the size at the trigger, the other half when the trade shows it is working, for example on a higher low above the entry. The total risk still cannot exceed the number you fixed. Adding to a trade that is going against you, to "average down", is not scaling. It is a second trade with no trigger, taken in the worst possible mood.

Scaling out is where most of the value is. Take a portion, a third or a half, at the first target from chapter five. Move the stop on the rest up to the entry, so the worst outcome is now a small gain. Let the remainder run toward the second target. You give up some of the best case and in exchange a trade that stalls at the first level, which is common, still pays.

Taking profit and the time stop

Profit is taken where the plan said, not where it feels good. The first target is the first target because the chart put a level there. Selling before it because the trade is "up nicely" turns a two R plan into a one R result, and chapter five explained what that does to the account over time.

The exit people forget is time. A setup that was supposed to move within a week and has done nothing for two is telling you something. Give every trade a deadline: if it has not reached the first target, or at least moved clearly in your favour, by then, close it whatever the price. Capital sitting in a trade that is going nowhere is capital not in the next setup, and an options structure is losing value every day it waits.

The journal

Before the trade, the seven answers are the journal entry. Write them down, in the order of the checklist, in a sentence each. After the trade, add three lines: what happened, whether you followed the plan, and one thing you would do differently. That last line is the one that makes the next trade better, and the one everyone skips.

Once a week, read the entries. Not the profit and loss; the answers. You will find the same question fudged again and again. That question is your edge, once you stop fudging it.

Example

This is a made-up example. A 25,000 dollar account, with the risk per trade fixed at one percent, so 250 dollars. XYZ with shares: entry 152, stop 146.80, 5.20 of risk per share. 250 divided by 5.20 is 48 shares, rounded down. Plan: sell 24 at 162, move the stop on the rest to 152, hold for 175. Time stop: if XYZ has not traded above 157 within ten trading days, close it.

The same account with the 150/160 call spread from chapter six at a 3.50 debit: the most one contract can lose is 350 dollars, which is more than 250. Two honest options. One contract with an exit rule that closes the spread if it falls to half its value, so the planned loss is about 175 dollars; or pass on the options and take the shares. Buying two contracts because "it is only 700 dollars" is not one of the options. The journal entry, written before the open, records which was chosen and why.

The question, answered

Fix the risk per trade as a fraction of the account; size is what that buys at this stop.
Add only when the trade is working, never when it is not. Take part off at the first target and protect the rest.
Give every trade a deadline and close it when nothing happens.
Write the seven answers down before, and one lesson after. Read them weekly.