Profit Target Setting

In This Lesson

Setting realistic and achievable profit targets.

Duration: 25 min

Overview

Setting realistic and achievable profit targets. This lesson will provide you with practical knowledge and actionable insights you can apply to your trading immediately.

By the end of this lesson, you'll have a clear understanding of the concepts and be able to apply them in real trading scenarios. Let's dive into the details.

Key Concepts

Risk/Reward Ratios

Minimum acceptable profit relative to risk. 2:1 means targeting 2x your risk as profit.

Measured Moves

Chart patterns often produce moves equal to pattern height. Provides objective targets.

Fibonacci Extensions

Mathematical levels where trends often pause or reverse: 127.2%, 161.8%, 200%, 261.8%.

Scaling Out Method

Take partial profits at multiple targets to balance certainty with potential.

Practical Application

Now let's put this knowledge into practice. Follow these steps to apply what you've learned:

1. Identify next major resistance level from entry point
2. Calculate risk/reward - only take trades with 1.5:1 minimum
3. Set multiple targets: conservative (high probability) and aggressive (home run)
4. Use limit orders at profit targets to ensure execution
5. Plan scaling strategy before entry - remove emotion from exit decisions
6. Track actual vs planned exits to improve target setting

Common Mistakes to Avoid

No Profit Target

Holding indefinitely hoping for more leads to giving back gains when trends reverse.

Arbitrary Targets

Choosing random numbers like "I want 10%" ignores market structure and leads to suboptimal exits.

All or Nothing

Exiting entire position at one price misses opportunities to maximize gains on strong moves.

Key Takeaways

Profit targets should be determined by market structure, not hopes
Multiple targets maximize both win rate and profit potential
The best traders plan their entire trade before entry: entry, stop, and targets
Scaling out reduces regret from both early and late exits
Let winners run with trailing stops after hitting initial targets

Your Next Steps

Ready to continue your learning journey? Here's what to do next:

• Review this lesson's key concepts
• Complete the practical exercises
• Take notes on what you've learned
• Practice with a demo account
• Move on to the next lesson when ready