[B]Student’s Question:[/B][B][/B]
I like trading triangle patterns but have always been a bit confused about how to determine profit targets. Would shed a little light on that? Thanks.
[B]Power Course Instructor’s Response:[/B][B][/B]
Sure…
In any type of trading scenario, not only triangles, the 1:2 Risk Reward Ratio can be employed. In other words, whatever stop the trader sets, double it and that will become your profit target or limit. So if the stop is set at 75 pips, then the limit will be 150 pips.
More specific to trading a triangle pattern would be the technique shown on the chart below. Plot the distance between the two extremes of the triangle’s range (line #1) and then take that measurement and when price action breaks out of the triangle formation in either direction, that distance (line #2) will be the price target objective. In other words, on the chart below, the price target will be the red line at the top of line #2.
