Why is this? The answer is fairly simple:
- Exits protect your capital when you are wrong;
- Exits also ensure you capture the bulk of your profits before price starts to reverse, eroding those profits.
Want proof? A trader I know who is successfully trading his own system has recently tested both aspects of his system, once with completely random entries combined with his exit rules, and then with his entry rules and random exits. Now, which do you think made money and which lost money???