diff --git a/docs/strategy-callbacks.md b/docs/strategy-callbacks.md
index 302ffd5fd..bd32f41c3 100644
--- a/docs/strategy-callbacks.md
+++ b/docs/strategy-callbacks.md
@@ -88,11 +88,11 @@ Allows to define custom exit signals, indicating that specified position should
 
 For example you could implement a 1:2 risk-reward ROI with `custom_exit()`.
 
-Using custom_exit() signals in place of stoploss though *is not recommended*. It is a inferior method to using `custom_stoploss()` in this regard - which also allows you to keep the stoploss on exchange.
+Using `custom_exit()` signals in place of stoploss though *is not recommended*. It is a inferior method to using `custom_stoploss()` in this regard - which also allows you to keep the stoploss on exchange.
 
 !!! Note
     Returning a (none-empty) `string` or `True` from this method is equal to setting exit signal on a candle at specified time. This method is not called when exit signal is set already, or if exit signals are disabled (`use_exit_signal=False`). `string` max length is 64 characters. Exceeding this limit will cause the message to be truncated to 64 characters.
-    `custom_exit()` will ignore `exit_profit_only`, and will always be called unless `use_exit_signal=False` or if there is an enter signal.
+    `custom_exit()` will ignore `exit_profit_only`, and will always be called unless `use_exit_signal=False`, even if there is a new enter signal.
 
 An example of how we can use different indicators depending on the current profit and also exit trades that were open longer than one day:
 
diff --git a/freqtrade/strategy/interface.py b/freqtrade/strategy/interface.py
index 1c53b2e3e..ebaa6568f 100644
--- a/freqtrade/strategy/interface.py
+++ b/freqtrade/strategy/interface.py
@@ -881,8 +881,8 @@ class IStrategy(ABC, HyperStrategyMixin):
         current_rate = rate
         current_profit = trade.calc_profit_ratio(current_rate)
 
-        if self.use_exit_signal and not enter:
-            if exit_:
+        if self.use_exit_signal:
+            if exit_ and not enter:
                 exit_signal = ExitType.EXIT_SIGNAL
             else:
                 trade_type = "exit_short" if trade.is_short else "sell"
diff --git a/tests/test_freqtradebot.py b/tests/test_freqtradebot.py
index e4066413e..3737c7c05 100644
--- a/tests/test_freqtradebot.py
+++ b/tests/test_freqtradebot.py
@@ -3663,6 +3663,7 @@ def test_exit_profit_only(
     })
     freqtrade = FreqtradeBot(default_conf_usdt)
     patch_get_signal(freqtrade, enter_short=is_short, enter_long=not is_short)
+    freqtrade.strategy.custom_exit = MagicMock(return_value=None)
     if exit_type == ExitType.EXIT_SIGNAL.value:
         freqtrade.strategy.min_roi_reached = MagicMock(return_value=False)
     else:
@@ -3671,10 +3672,15 @@ def test_exit_profit_only(
     freqtrade.enter_positions()
 
     trade = Trade.query.first()
-    trade.is_short = is_short
+    assert trade.is_short == is_short
     oobj = Order.parse_from_ccxt_object(limit_order[eside], limit_order[eside]['symbol'], eside)
     trade.update_trade(oobj)
     freqtrade.wallets.update()
+    if profit_only:
+        assert freqtrade.handle_trade(trade) is False
+        # Custom-exit is called
+        freqtrade.strategy.custom_exit.call_count == 1
+
     patch_get_signal(freqtrade, enter_long=False, exit_short=is_short, exit_long=not is_short)
     assert freqtrade.handle_trade(trade) is handle_first