Write Your Exit Plan Before You Buy

The best time to decide when to sell is before you buy. Once you own something and the price is moving, emotions get loud. A written exit plan made with a calm head gives you something to follow when it matters.

This guide walks through what an exit plan covers and offers a template you can copy. Examples use placeholder assets and illustrative numbers only.

Why plan the exit first

When prices rise, it is tempting to believe they will keep rising, so people hold too long. When prices fall, it is tempting to believe they will bounce back, so people hold too long again, or panic and sell at the worst moment. A plan made in advance reduces both problems because the decision was already made by “past you,” who wasn’t under pressure.

An exit plan also makes you think about whether the trade makes sense at all. If you can’t describe when you would sell, it is worth asking why you are buying.

The five parts of an exit plan

1. Your reason for buying

Write one or two sentences. “I want long-term exposure to this type of asset and I’m comfortable holding through big swings” is a reason. “Everyone is talking about it” is not much of one. Your reason helps decide when the plan has stopped making sense.

2. Position size

How much you are putting in, as dollars and as a share of your portfolio. See Position Sizing Basics.

3. Profit-taking rules

How you’ll sell if the price rises. Common options:

• A price ladder: sell portions at set gains. See Laddered Profit-Taking.
• A time schedule: sell a fixed portion every month after a big gain. See Dollar-Cost Averaging In and Out.
• Recover your initial investment: sell enough to get your starting money back, then hold the rest. See Taking Out Your Initial Investment.
• A moonbag: decide in advance what portion, if any, you’ll keep no matter what.

4. Loss rules

How you’ll respond if the price falls. Options include:

• A loss limit: “If my position falls 40% below my cost basis, I’ll sell half.” Some platforms support stop orders, but note that in fast markets these can fill well below the trigger price.
• A thesis check: “If the project stops development or the reason I bought no longer holds, I’ll exit.”
• Accepting a total loss: for small speculative positions, some people decide in advance to hold to zero. That is a valid choice only if the position is sized for it.

5. Review schedule

When you’ll look at the plan, for example on the first of each quarter. Reviewing on a schedule rather than on every price swing keeps you from rewriting the plan out of FOMO or fear.

A template you can copy

Asset: Token A
Date: ____
Reason for buying: ____
Amount: $____ (__% of portfolio)
Profit rules:
  +50%  -> sell 20%
  +100% -> sell 20%
  +200% -> sell 20%
  Keep 20% as moonbag
Loss rules:
  -40% from cost -> sell half, reassess
  Thesis broken -> exit fully
Review: first Sunday of each quarter
Changes to this plan only on review dates.

Every number here is a placeholder. Choose your own based on your situation and risk tolerance.

Making the plan easier to follow

1. Use limit orders where possible. Placing sell orders in advance means you don’t have to act in the moment. Check whether your platform keeps orders open and what fees apply.
2. Set price alerts. Most exchanges and portfolio apps can notify you when a level is hit.
3. Keep the plan visible. A note on your phone or a pinned document you check before every trade.
4. Tell a friend. Saying your plan out loud makes it harder to quietly abandon.
5. Plan for taxes. In the US, selling is generally a taxable event, and holding over a year can change the rate. See Tax-Aware Profit-Taking and consult a tax professional.

When it’s OK to change the plan

Plans should change when your situation changes, not when the price does. Good reasons include a change in income, a new financial goal, or new facts about the asset that undo your original reason for buying. Bad reasons include “it’s up 30% this week and everyone says it’s going higher.”

If you change the plan, write down the new version and the date, and keep the old one. Looking back at your changes is one of the best ways to learn your own habits.

Common mistakes

• No plan at all. Buying first and figuring out the exit “later.”
• Profit targets with no loss rules. Planning only for the good outcome.
• Moving targets upward as the price approaches. If you raise your sell level every time it gets close, you never sell.
• Plans that are too complicated. Twelve rungs and five conditions are hard to follow. Simple wins.
• Ignoring fees and taxes. A plan that sells in many tiny pieces can be costly.
• Treating a stop order as guaranteed. In sharp drops, orders can fill far below the level you set.

Key takeaways

• Decide your exit before you enter, while you’re calm.
• Cover profit rules, loss rules, sizing and review dates.
• Automate what you can with orders and alerts.
• Change the plan for life changes, not price changes.