LC100

This article will attempt to briefly annotate the concept of
finding a profit target.

As they say... you should always have a profit target and stop loss
before you ever enter a trade.

I have always said that any trading strategy should have an exact
entry, profit target and stop loss level. The logistics of these parameters
will obviously change due to the currency pair and or the time frame that the
trade signal is identified.

Lets start with the currency pair:
As we all know, each currency pair has a typical average daily range.
This means that we should be aware of this range before we enter a trade and we
should not expect a currency pair will more more than the range.
Knowing this range in advance could help you determine where to take profits
if you are creating your own system.

Another thing to consider is economic data or news that can affect the policies
that have an impact on interest rates.
As easy as some individuals make trading the Forex seem, the reality is in order
to succeed you must understand how these elements can and do have an impact on
your trade and the markets.

Now, how do we find a target with this information?

Before we go any further, we much consider technical analysis.
Most traders are familiar with fibonacci retracements and extensions.
Using Fibonacci tools to determine how far price has retraced and then using
that level to project an extension target is how many traders locate targets.

However, there are many things to consider...
The first is to ask yourself if the extension targets fit within the
typical average daily range?
And does the economic data available corroborate the trade you have found?

There are also technical levels such as Support and Resistance that can also
potentially prevent price from reaching certain levels.
One of the ways to determine major Support and Resistance levels is to identify
them on the daily and four hour charts and draw them in on the time frame you
prefer to trade.

Another element that can have an impact on price is fulcrums and pivot pionts and
psychological levels.

When you see a convergence of several elements listed above after a retracement in price,
you are more like to see price move to those levels. These levels are typically
profit targets.

I have a link to download a fibonacci calculator on my website. There you will also find
additional information on how to use the fibonacci levels.


Thanks for reading,
L.C.
udaytrading.com