AUTOGRAPHS

Three Methods Of Setting Trading Targets – Technical Analysis Explained

As soon as you are making a trade the question quickly comes out :  How and when do you pull out of the trade at a profit ?   Directing 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.

Aims can be time-based (I’ll stay in the trade for 3-week) or found on technically (I’ll keep doing the trade until my slow moving average crosses over my faster moving average)  or  found on profit (I’ll quit when I make the open profit of $1000   ), or based on price (I’ll stop of the trade when it reaches my target price .)

Of the 3 methods each has some advantages and liabilities .  Technical exits are often available and delete the part of personal opinion  , but work well only in strong trends , cause losses in the crowd, and nearly all the time leave a number of money upon the table .  Found on time tools are useful at times but just as often are net losers , and so shouldn’t be seriously considered as a single tool .   Found on profit exits can train a trader to take frequent profits but what happens when the trade continues far above your pre-planned exit point ?  This violates the easiest rule of trading: let your winners run .

The best means of quitting is to decide aimed prices but only when these are soundly set up in the market structure and show the market’s existing support and {resistance matrix}.  If your trade plan {takes into account} the natural support and resistance of the market then your target will be sound and your chances of remove everything that the markets has is much more higher then with arbitrarily chosen, fixed-dollar profit aims (which attend to be driven by emotion)  or a technical moving average tool (which by defined compelled to leave a lot of money upon the desk).

How are you going to set profit aims according to market structure instead of an arbitrary dollar objectives?  For some of us 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 , directing targets is not hard to finish. The basic technique is to {use your higher time-period support} and resistance levels ( it should normally be one time-period higher than your trading time-period), and to direct your targets at the next 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 are using a five minutes chart and take a position using your best entry system. The market starts to move in your favor and since you have put on a position with 5 contracts you quickly accumulate a profit of $750 .  You are glad and desire for more and that makes you want to get profits quickly , especially as you notice a slight retracement in the 5-minute chart. But, knowing that market structure is often 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 quickly see that your entry was next to daily and weekly support , at the last 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 improvement of the five-minute bar with its slight retracement is all normal and go on with the idea that the market has {further upside}. You set a price objective at the daily resistance and make a warning  to sound when that is full filled, so that you can take profits there .  You can then further assess if the market will reverse and move backward to the original support level or pause and keep going to higher level of resistance.

One of the main points is that when watching 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, you are in full control because you know the structural aim mostly as the market goes between its higher time- period support and resistance levels.

50. How to Set Trade Position Size for Maximum Profits