The old saying goes that you don't have a profit until it's booked. An exit strategy helps you protect your profits and is a mandatory component of any good trading plan. Your exit strategy should be determined prior to entering the trade. One component of the exit strategy is your stop. This will protect your downside if the trade initially goes against you. Next if the trade starts to become profitable, you would convert you initial stop to a trailing stop, that you would move in the direction of the trade as it becomes more profitable. The trailing stop is designed to protect you from a sudden and adverse move in your stock due to company specific or general market news.
The other piece of the exit strategy is your target price. What do you do when the trade is either getting close to your target price or has stalled. Your choice here is to either exit the entire trade now or to only exit a portion of the trade. For smaller accounts were your positions are only 100 shares it doesn't make sense to scale out of the position. Instead to just sell the whole position and look for a new opportunity.
For a larger account the decision on whether or not to scale out is more difficult. If you see a trend is losing steam, you can sell part of your position and let the remainder run. The larger your account, the more aggressive you can be with your trading by taking partial profits. Either take, 1/2, 1/3, 1/4, or 1/5 profits depending on how aggressive you want to be or how much profit is in the trade.
In summary, your exit strategy is just as important as your entry strategy. It will mean the difference between profitable and unprofitable trading.