Three Methods Of Setting Trading Targets - Technical Analysis Explained

If ever or whenever you are making a trade the question quickly rears its head : How and when do you leave with a profit

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

Objects can be based on time (I'll keep doing the trade for 3-week) or found on technically (I'll keep doing the trade until my slow moving average across my faster moving average) or profit-based (I'll leave when I have an open profit of 1000usd ), or price-based (I'll stop of the trade when it reaches my target price .)

Of the three methods each of them has some gains and losses. Technical exits are always available and remove the element of private opinion , but work well only in powerful trends, cause losses in congestion , and almost all the time leave a number of money upon the table . Time-based tools are helpful at times but just mostly are net losers, and so cannot be seriously taken as a single implement. Found on profit exits can teach a trader to make frequent profits but what happens when the trade keeps going far above your pre-determined exit point ? This violates the easiest rule of trading: let your winners run .

The greatest means of leaving 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 plan of trading {takes into account} the natural support and opposition of the market then the target of yours will be sound and your chances of remove everything that the market offers is even more higher then with arbitrarily chosen, fixed-dollar profit targets (which tend to be emotionally driven ) or a technical moving average tool (which by defined obliged to leave huge amount of money upon the desk).

How are you going to set profit targets according to market structure instead of an arbitrary dollar objectives? For somebody it is not an easy question but for the trader who has built an understanding of multiple time period structure and the ability to project the support now and resistance levels forward in the future , directing targets is not hard to finish. The simplest technique is to {use your higher time-period support} and resistance levels ( this should commonly be one time-period higher than your trading time-period), and to set your target at the coming logical assist or resistance level over the current price.

Technical analysis explained as follows: Suppose you are day-trading the S&P E-mini contract. You are using a five minutes chart and take a position using your favorite entry system . The market starts to work in your favor and since 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 take profits quickly , especially as you see in eyes a slight retracement in the five minutes chart. But, understanding that market structure is all the time at play, you step backward for a period and view the everyday and weekly charts. On your Drummond Geometry charts you can view quickly that your entry was next to daily and weekly support , in the end 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 nine full points away, and that the advancement of the five minutes bar with its slight retracement is entirely normal and consistent with the thought that the market has {further upside}. You set a price target at the daily resistance and set an alert to sound when that is filled , so that you are able to make money there. You can then further assess if the market will reverse and step back to the first assist level or pause and continue to higher level of resistance.

One of the main points is that when researching market structure as opposed to arbitrary dollar value price aims you mostly have a handle on what the market is doing . As a technical analysis explained course teaches, full control taken by you since you know the structural objective at all times as the market flows between its higher time- period support and resistance levels.

Three Methods Of Setting Trading Targets - Technical Analysis Explained

By: Ted Hearne

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