How Trend Traders Find Profit Targets and Goals on Trade
When traders have to decide to take the trend following approach, they come to key question that needs to be answered. Should they hold onto their trade in the trends until the trends end or should they seek a higher probability yet lower payout profit targets? While trends traders who have been made famous have taken the former approach, the latter approach of clear-cut profit targets and goals is easier to turn into a repeatable system, which appeals to many traders.
Methodologies of Profit Targets and Goals
There is the multitude of indicators and tools that trends traders used to exit trades at a profit. However, these are a few of the more popular ways to find possible exit points equal waves.
This approach is as straightforward as it gets. Once you have identified a correction or trend the entry point, you only need to measure the prior trend length.
Example: Let’s say the prior trend is 500 pips long. You can add in an uptrend or subtract in a downtrend the prior trends length and make the huge profit targets, the more volatility you can expect and the longer you can expect the profit targets and goals to hit.
It builds off the equal wave approach but is more customizable. The Fibonacci extension builds off the Fibonacci sequences and looks for multiples off the prior trend to be a profit targets and goals. In the attached chart it shows a few key of Fibonacci extensions off the first big move lower in EURUSD.
The shorter-term trader trend follower favors the pivot point approach. Pivot points provide objective levels in the direction of the trends based on 3 key prices, the high, low and close. Swing traders benefit from weekly pivots, but longer term traders can use longer-term pivots like monthly pivots, but longer term traders can use longer-term pivots like monthly pivots as well. In an uptrend, the R1 and R2 are classic targets, and the S1 and S2 are downtrend targets. Biggest benefits to using pivots are that when the trends are clear, you can easily use the pivots to bring the great Risk: Rewards.
Click in Link: How to use them effectively in Forex Trading
Manage Your Risks
Watch the downside, and the upside automatically takes care of itself. While we are taking a more calculated approach than letting the upside take care of itself, the message is that what every trader needs to focus on the first and foremost is the downside.
When you watch the above two approaches the equal waves and Fibonacci extensions, you can cut the profits targets and goals by a half or two thirds and make the point protective stop. Therefore, if your profits target is 600 pips you can set your protective stop at 300 pips at half or 200 pips at a third of the way away from the entry.
Whenever you are looking at the pivot point approach, you can use the key levels of the pivot to manage the risk. In an uptrend, where you are using R1 or R2 as a profit target, you can use the pivot or the S1 as a protective stop. In downtrends, you can also use the top side of pivot or the R1 as a Protective stop.