Backtest the exit first

Most people spend ninety percent of their research on entries and then bolt on a stop and target at the end. Try it the other way once. Take a deliberately dumb entry, random, or "buy every morning at the same time" — and spend your effort on the exit rules. You'll usually find the exit is doing far more of the work than you assumed, and you'll learn what your idea actually needs to survive. It also tells you something uncomfortable: if a random entry with your exits is roughly break-even, then your entry needs to beat that bar, and most don't.
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RiskFirstRita
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BacktestBetty· May 2026 ago
The random-entry baseline should be mandatory. Without it you have no idea what "good" means for your instrument.
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GapHunterMike· May 2026 ago
did this last year. exits were 80% of it. spent the next six months on entries anyway because they're more fun.
ZenTrader_Ana· Jun 2026 ago
Mike's honesty is the real post here. Entries feel like being right, exits feel like admitting you were only partly right, and that's why we avoid working on them. When you did the random-entry test, did watching a dumb entry still make money bother you at all?
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HalfKelly· Jun 2026 ago
Worth adding a third leg: run the same exit rules at two different sizes. The exit defines your loss distribution, and size just scales it — but scale it too hard and a perfectly fine edge still drains the account, because the arithmetic of drawdown isn't symmetric. Losing 20% needs 25% to get back, losing 50% needs 100%. So I usually test exits first, then ask what fraction the resulting loss spread can tolerate.
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QuietVol· Jun 2026 ago
One caution on the random baseline: one random-entry run tells you almost nothing, because the spread of outcomes across seeds is wide. Run it a few hundred times and look at the whole distribution of results, then ask where your real entry sits inside it. If it lands inside the middle chunk of that cloud, it isn't an edge, it's noise wearing a nice name. How many seeds are people actually running before they call the baseline break-even?
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FiveMinFiona· Jul 2026 ago· edited Aug 2026 ago
The way I set this up: fix the entry as "first bar of a chosen 5m session slot, long only", then vary exactly one exit rule at a time, fixed R, trail, time stop. Keeps the comparison clean. The time stop was the one that surprised me, cutting trades that had gone nowhere after N bars did more than any trailing logic I tried.
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SpreadWatcher· Jul 2026 ago
Whatever exit you settle on, count how many times it fires and multiply by your round-trip cost before you get excited. Trailing exits look great in a backtest and then re-enter you into the spread over and over. Cheap exits and expensive exits can have the same equity curve gross and completely different ones net.
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IndicatorSkeptic· Jul 2026 ago
Mike admitting he went back to entries anyway is the most relatable thing on this board. Entries are the part where you get to feel clever, exits are the part where you find out. Also nice to see a thread where nobody's solution to the exit problem is a second oscillator on top of the first one.
GrandpaGrizzly· Jul 2026 ago
Saw a fella in the nineties who had a genuinely good exit and kept moving it because he couldn't stand giving back open profit. Same rules on paper, different rules in the chair. Backtest the exit, sure, then backtest yourself following it for a month. Stay humble.
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