Dear all,
I’m in the process of creating my own trading system and now I’m trying to define what kind of profit target I should use. Sometimes the trading patterns helps me to difine this, but in case there is no pattern…
Do any of you have an idea how I should do this? Share your ideas and practice with me.
Many thanks for all,
Eh Hope all is good! Usually what I do is let it ride for all can get, of course I am a position trader. I do, however have a clear idea of what my profit target is based on how much I risk. So, depending on your system’s winning percentage, and how much you risk you want the profit you take to be greater than both these. For instance say your system wins 50% of the time and you set a fixed stop for 30 pips, you want your profit to be over 30 pips (ususlly they say 45 pips in this situation). The more pips your profit is, the less the winning percentage. That is if you have small stops, but the larger the stops, the more you tend to lose your capital, unless of course you have a large stake. And conversely the smaller the profit the greater the winning percentage, however as long as the percentage and the size of the win together is greater than the loss, your in the clear. People usually use this formula:
Loss = (losing %) x size of the loss < (winning %) x the size of the win
If this holds then you should be good. What I do, and this is just me, is I define my risk as larger than it really is, that way I make sure I am in the clear even when I get in a losing period. This also helps me stay disciplined.
Hope this helps you out, just one opinion!
Stay Cool, Take it easy!
I like to either wait for a 5/10 EMA cross or a reversal candlestick pattern to show up at the top or bottom of a trend, preferably at major resistance or support (Engulphing patterns, morning/evening stars, hammers or shooting stars, etc.). I have been trying to find one consistant way but I don’t think that’s posible because what works on one trade might not work on anoter.
Topgun
It really depends what kind of trading approach you are taking.
For example, if you are a trend trader, you probably would never want to set a specific target. The idea of that kind of trading is to take as much as the market will give you by riding the trend for all it’s worth. You wouldn’t want to jump off prematurely because that would probably severely damage your performance.
If you aren’t trend trading, you should take a hard look at the kind of moves that take place after the set-up you are using occurs. Go with the odds. They will always serve you best in the long run.
Thanks a lot for the ansewrs, they really help me to get closer to deside my strategy.
As I’m working and only have time in the late afternoon I chose 4 hour and daily charts for analysis. Do you use Fibonacci retracements or pivot points to find out your targets? Or simetimes there is a possibility to use Fibo extensions by usual trading patterns. For example I have got the info from a course that by a double top trend changing pattern we could have more targets depending on the momentum (FIBO 161,8% / 200% / so on…and 100% is normally the hight of the higher top). Do you know anything about this?
[B]Topgun,[/B]
Are you trading on less than 1 hour charts? I also had the same thoughts like you, my only problem was that I’m not sure about the period of the slow and fast EMA to watch for in 4 hours or daily charts. Now I have EMA 10 and EMA 20. These help me to identify new trends. I have backtested and they seem to work. Is these crossovers that you use for exiting and entering?
[B]Rhodytrader,[/B]
I thought I need to have a feeling about the future move the pair based on the economic reports and various news that affects them. Normally we should have profit target that you think the price will reach. Anyway when you enter the trade do you really just follow the happenings and exit when you see the trend turning?
Thx 
I use two positions when I trade. 2/3 and 1/3 the first position I will take profit between half my stop loss and same as my stop loss. The second I will let ride for the long run. This allows me to profit in multiple market conditions choppy and trending.
When I trade, I open two positions. One will TP at the nearest support/resistance area (this is the conservative trade).
The other I will move the stop to break even, and trail.
ALWAYS take profit when the market gives you it.
I just make small profit target. The most important is i can make it consistently. But i also try to make my skills be better so i can get more maximal profit with my broker.
My typical TP target would normally be the nearest sbr/rbs area (role reversal). Another way is i use fibonacci levels to find up to 3 TP area.
TP1: 161.8
TP2: 261.8
TP3: 423.8
Thx for share your view.
Before I determine my profit target, the more important thing to do is to determine where I will protect my capital.
Win > Break-even > Loss
Hello to the OP:
I agree with everyone here…
One element that could be added, if it fits with your strategy, would be using the Average True Range indicator reading to determine your stops and profit levels, for example:
if you were a day trader, you would add the ATR indicator and use the reading for the Daily chart on your chosen pair and, for example, you could set your profit at twice the ATR value (if your Risk/Reward ratio was 1:2, for example), or use the same ATR value for both stop and profit (if your Risk/Reward ratio was 1:1, for example)… Some people use ATR values plus half, or any variations on the theme, depending on the pair and on the circumstances.
Remember that the ATR is a lagging indicator, therefore if you were holding on to a position for several days or weeks, your pair’s volatility may change, in which case you may want your stop and profit levels to reflect that (e.g. moving them each day, according to the changing ATR value) or, perhaps, ignore that and go by what you set at the start of the trade.
Here is some basic reading that you may like to use: Manage Stops Like a Professional: ATR | DailyFX
Good luck.
Cheers.
I choose my take profit mostly at nearest support or resistance level. If the trend is strong and move is fierce, then I take next level as my take profit.
Well, I have two rules for stop placing and profit taking. For stops I try to put it outside volatility and for the take profit I try to put it inside volatility.
Before start trading, trader should clear all basic concepts about trading. Process of selecting profit target is depend upon your trading portfolio.
It also depends on the time frame you are using and on to your strategy as well. Scalpers will have small small profit targets whereas long term traders will have high TP.