1. The method by which a venture capitalist or business owner intends to get out of an investment that he or she has made in the past. In other words, the exit strategy is a way of "cashing out" an investment. Examples include an initial public offering (IPO) or being bought out by a larger player in the industry. Also referred to as a "harvest strategy" or "liquidity event".
2. In the context of an active trader, a plan as to when a trade will be closed out.
Investopedia Says:
1. It's more difficult for a VC or entrepreneur to get money out of an investment because they are generally dealing with private companies. When a firm is private, the shares cannot be sold nearly as easily as when the firm is publicly traded on a stock exchange. So, even though a private startup firm could be worth millions of dollars, the VC/entrepreneur has little access to this wealth. You can think of the exit strategy as the first opportunity to trade an illiquid asset (shares in a private firm) for a very liquid asset (cash).
2. For example, a trader might set a stop-loss order to exit a trade if a stock drops a certain percentage.
Related Links:
What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop. IPO Basics Tutorial
Avoid taking premature profits or running losses by setting appropriate exit points. A Look at Exit Strategies
Adopt a sound exit strategy based on support and resistance levels while understanding the market psychology behind them. Trading on Support
Waiting may be the biggest key to reeling in that trophy investment. Patience Is A Trader's Virtue
