Most traders follow a familiar routine when planning trades:

They scan for a setup — a candlestick pattern, a moving average crossover, or a favourite indicator alignment. 

When they find one, they take the trade, set a stop somewhere “logical,” and target a multiple of their risk.

And, there is nothing wrong with this! It is systematic and structured, and if it is based on a specific set of unambiguous criteria within your trading plan, it can work to your advantage. 

But, perhaps there is another way to achieve improved trading outcomes?

The potential flaw in the “every trader does it” approach is subtle but can be critical. 

It assumes that the setup itself automatically means the market will move as far as you expect, and be clean enough for the trade not to be impacted by market noise.

However, without a logical, higher probability exit point, your supposed great entry could quickly turn into the wrong trade.

This is where reverse engineering your trade (starting with the exit) comes in.

 

What Is Reverse Engineering in Trading?

Instead of beginning with the entry, you start with a different question: “Where is price most likely to go — and is there a logical reason for it to get there?”

You look for the destination or a ‘zone’ where the price has a high probability of pausing or even reversing. 

Current price action is often dictated by previous price action to some degree. This could be a support or resistance area, a previous swing high or low, or a volatility cluster that you may expect the market to seek out and price to hit.

Once you have identified this likely exit point, you work backwards:

• Is there enough space between the current price and this target for the trade to offer a meaningful reward compared to the risk you are taking?
• Where would a logical stop be to make this trade viable from the perspective of my own risk/reward profile?
• Do current conditions make this trade worth entering now, or would it be prudent to wait?

Instead of forcing entries every time a setup appears, you filter opportunities through a forward-looking lens of probability based on what could happen based on price action.

 

Why the Exit-First Approach May Give You an Edge

When your focus is primarily on entry patterns, your risk-reward may suffer without you realising it. You may end up chasing trades where price has little room to move, ignoring close potential pause points in order to justify the trade, so squeezing risk-to-reward into the desire to simply get in, or worse, jumping in right before price reverses on you.

The exit-first mindset, although perhaps seeming a little pedantic, may encourage you to engage more frequently in trades where:

• The market context supports a move in your favour.
• The price destination, and so reward, offers both logical and likely potential.
• The risk-to-reward is completely justified, without letting some of the “force a trade” demons take hold, resulting in you pressing the entry button without checking this.

This alternative approach in how you view trade decisions does not mitigate the necessity to place meaningful stops or trail positions, but it could have the ability to force you to trade with the bigger picture in mind, not just the immediate momentary signal.

 

How to Reverse Engineer a Trade

Step 1 — Define a High-Probability Exit Zone

Study the chart and identify where and why the market has a reason to go to a particular price point.

This is not about predicting the future per se, but about recognising where price may be naturally drawn based on observable market structure and previous price behaviour.

These zones often include areas like:

• A price level that has respected a support or resistance level on multiple occasions. 
• A prior (and usually relatively recent) swing high or low that acted as a turning point.
• Major round numbers that commonly attract stop positioning.

These zones often act like magnets; they can be points where market participants have historically placed orders (and may have more pending orders) or reacted strongly in the past.

With the focus on these likely destinations first, you force yourself to consider the broader market context before setups. Even if we like to think we will take this into account in any entry decision, to make it your thinking start point, rather than the excitement of a new set-up, is a logical way to keep those emotions channelled correctly.

Step 2 — Assess the Trade Space Between Price and Target

With your potential price destination mapped out with clear reasoning, the next step is to examine the space between the current price and your identified target zone.

Make the decision as to whether the market offers a meaningful opportunity, or if it is already too late to enter to justify the risk.

This is where you assess your reward potential relative to your probable stop-loss size.

For example, if the price is only a few pips or points away from your exit target, it may not be worth entering, even if the setup appears to meet your planned entry criteria. 

Conversely, if price is a defined distance away from your end point, with enough space to move and few hurdles to negotiate (e.g., previous pause points), that could be the opportunity you are looking for.  

Step 3 — Identify a Low-Risk Entry Within That Trade Space

Now you look for your familiar entry triggers — within a clearly defined context where you already know:

• The price you are targeting.
• How much room price could move before it hits your identified zone
• Where a stop could be placed logically whilst still retaining a desirable risk/reward ratio.

You may choose to wait for a pullback to a previous key level and confirmation of a bounce, evidence of increasing momentum, or look for confirmation of a continued directional move in price action patterns.

So, you are entering with a plan built around where price is going and not just reacting to where price may be right now.

Once you have practiced this a few times, this is an approach you can pre-plan, perhaps even prior to market open. Identifying your top 3 could provide clear guidance for the session ahead. 

 

What This Approach Changes About Your Trading Psychology

Trading with the end in mind can help shift your focus from one of reacting to one of improved planning. 

The aim is to more naturally:

• Take fewer, higher-quality trades.
• Avoiding emotional decisions based on the ‘heat-of-the-moment’ setups and considering context more fully
• Managing your trades with more clarity as you understand the complete structure you are trading

Summary

We are not suggesting for one moment that you should abandon what you are doing now, particularly if it is yielding great results. This is an alternative that may be worth adding to your trading toolbox to potentially harness the power of trading with the end in mind.  

Reverse engineering your trades is a different way of looking at things, and probably a very new way of thinking about the market that differs from what is traditionally taught.

It will by default force you to look at and respect structure, context, and reward potential before you ever consider pulling the trigger.

By starting with the exit in mind, you naturally filter out lower-quality trades, focus on logical market movement, and step away from the emotional pull of “setup chasing.”

It is also worth re-emphasising that there is no difference in the need for a carefully crafted and tested trading plan between this and any other strategy.

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