Set Targets -- One Of The Most Important Thing Of Trading With Technical Analysis Explained

When you are making a trade the question quickly appears: How and when do you leave without losing a cent

? Pointing targets has to be a very important part of your trading strategy , and this is the subject of the next article in our series Technical Analysis Explained.

Aims can be based on time (I'll keep making the trade for 3 weeks ) or technically-based (I'll stay in the trade until my slow moving average passes over my faster moving average) or found on profit (I'll leave when I make the profit of 1000usd ), or found on price (I'll leave of the trade when it reaches my target price .)

Of the three ways each one has some pros and cons . Technical exits are mostly available and delete the part of private opinion , however work well only in effective trends , cause deficit by congestion , and nearly always leave much money on the desk . Time-based tools are helpful at times but just as always are net losers , and so shouldn't be seriously considered as a single tool . Profit-based exits can train a trader to take frequent profits but what happens when the trade continues far beyond your pre-decided exit point? This violates one of the basic rules of trading: run after you win .

The greatest meaning of selling is to decide price targets but only when these are soundly set up in the market structure and point the market's existing support and {resistance matrix}. If your trade idea {takes into account} the natural assist and resistance of the market then the target of yours will be good and your chances of taking out all that the markets has is far higher then with arbitrarily chosen, fixed-dollar profit aims (which tend to be driven by emotion ) or a technical moving average tool (which by defined obliged to leave huge amount of money on the table ).

How do you set profit aims according to market structure instead of an arbitrary dollar objectives? For some this is not an easy question but for the dealer who has developed an understanding of multiple time period structure and the ability to project this support and resistance levels forward in the future , setting targets is easily finished . The basic technique is to {use your higher time-period support} and resistance levels (this should usually be one time-period higher than your trading time-period), and to point your targets at the coming logical support or resistance level upon the current price.

Technical analysis explained as follows: If you are day-trading the S&P E-mini contract. You're using a 5 minutes chart and take a position using your best entry system. The market begins to work in your favor and enhance you have put on a position with five contracts you quickly accumulate a profit of $750 . You feel happy and turn a bit greedy and that makes you want to get profits quickly , especially as you see a slight retracement in the 5-minute chart. But, knowing that market structure is mostly at play, you stay back for a period and take a look at the everyday and weekly charts. On your Drummond Geometry charts you can see fast that your entry was close to everyday and weekly support , at the bottom of the daily envelope and close to the weekly envelope bottom too. You can see that the logical target of this initial move is at the daily PLDot some 9 full points away, and that the advancement of the five minutes bar with its slight retracement is totally normal and continue with the thought that the market has {further upside}. You set a price objective at the daily resistance and make an alert to sound when it is full filled , so that you can make money there . You can then further assess if the market will reverse and walk back to the original support level or pause and continue to higher level of resistance.

The important thing is that when watching market structure as opposed to arbitrary dollar value price targets you mostly handle what the market is doing . As a technical analysis explained course teaches, you are take full control because you are aware of the structural objective mostly as the market goes between its higher time- period support and resistance levels.

by: Ted Hearne

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