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Price Target Errors

A person who leaves his domicile must have a destination in mind otherwise he or she is going out for a promenade.

Evidently trading is not about a promenade.  One wants to invest, and get a pleasing return. Nothing more and nothing less.  Therefore, one must have a price target as soon as one opens a position.  This article will help technical traders understand the importance of setting a profit target.

Why One Should Always Set Profit Targets


A trader who sets a profit target is an intelligent one who knows where the price is headed.  It allows one to secure gains instead of seeing them gradually turn into loss.  It also helps a technical trader to bank partial profit as the momentum itself is gaining momentum. 

The profit targets help traders to anticipate the reactions of others market participants, and be in control of their own destiny.  It is really the trading plan one is going to follow when the market is changing fast.

Based on the market principle that indicates that the price is always headed to a specific profit target, it will be irrational that a clever trader or investor falls into that price target trading error.

Setting Only One Profit Target

One should set at least one profit target, but in many cases, it is a price target trading error to set only one target. 

In general, there are a midpoint and ultimate profit targets.  Nevertheless, one can set other price targets that one wants to consider.  I will be discussing this topic in depth on my 24stocktrader YouTube channel. 

Indeed, it is compulsory that one knows both the midpoint and ultimate profit targets even if one decides to consider other targets.

Note that there are always multiple profit targets instead of just those.  Though the price does not always hit the targets, one must always set them.

Ignoring Others' Price Targets

There are so many ways technical traders set their targets.  Therefore one should not be fooled and think that everyone is doing the same thing. 

So which target one should set?  Just set your targets according to the market principles, but do not ignore other market participants. 

Quite often traditional day and swing traders forget about Fibonacci, Elliott wave and fundamental traders.  By doing so they misinterpret the price-action.

Too Greedy Careless

I have seen it all the times when the price is about ten or twenty pips away of the price target after a nice move, then it slowed down instead of hitting the price target as one is expecting it.  One of the reasons is more conservative traders are cashing out.

Sometimes, because of cautious traders, a greedy and careless technical trader can give away a significant ratio of profit as the price turns around without a warning.

Please secure gains, and manage the trade without giving away a great proportion of your hard earned profit. 

Doing Nothing After A Breakout

The price can break above a price target and headed to the next price target or support or resistance.  Do not sit idle, but look out for the next trading signal. 

Look out for the validation of the price target level as a support in an uptrend, but resistance in a downturn.  Subsequently, apply a top-down trading method to take the breakout trading signal without losing.
Watch out for the 138.2% and 161.8% Fib extensions because of the Fibonacci traders.

Ignoring Key Levels Near Price Targets

In an uptrend, the price is looking for the best resistance.  If there is none, it will continue to rise.  The opposite is about that best support level in a downturn where the bullish reversal will occur.

The price target trading error in this instance is to
ignore the key level above or below the price target.  In many cases, the price will rise to the key level  after breaking above the price target.  In general, the market often prefers the key level above (uptrend) or below (downturn) the price target.

Ignoring 138.2% Fibonacci Extensions

After setting the ultimate price target, one must highlight the 138.2% Fibonacci extensions of the range of the ultimate price target (from the starting point). 

The same rules apply to the hidden key levels such as 138.2%, 238.2% and 338.2%  that are above or below the price target.

Alright?  That will do for now.

Conclusion

One can quickly improve trading results if one begins to rectify past price target trading errors.
One that masters the price target trading will also be able to anticipate both the next price-action, and reactions of other market participants. 

A technical trader can be in a down spiral trajectory if he or she does not know about the profit target trading errors.
I hope this article will help one become a better price target technical trader.
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Happy Trading

This article is written by G Beaulieu
founder of Stochastic-MACD.com
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