Tackle Today: “T” is for Target
September 17, 2021
≈ Take aim. ≈
Traders,
Identifying the risk versus reward for potential trade ideas is crucial. Yesterday we learned why you need a stop loss to calculate risk. Today, we’re looking at how to use a profit target to assess the potential reward.
Here are a few interrelated points to remember when setting a target.
- First, it needs to be realistic. If the stock only ends up reaching your target in 10% of your trades, it’s likely because you’re setting your sights too high. For example, if you buy a stock for $100 and set your target at $130, then you’re asking the stock to rise 30%. Is that feasible given the history of the price trend? If not, bring the target in closer.
- Second, the target should be reachable within the planned trade duration. If you’re swing trading and select a target that would take two months to reach, then you’re being unrealistic.
- Third, the Average True Range (A.T.R.) indicator shows how much a stock moves per day. For a swing trade, consider using a target that’s within 1 to 3 A.T.R.s. Anything beyond that might be more appropriate for a position trade.
- Fourth, let the chart be your guide. The best traders usually place targets at key support or resistance zones to align their targets with so many other traders.
Our S.T.E.P. Trading System will guide you through the best practices for setting targets on the most common price patterns.
#TeamTackle
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Chart of the Day
Affirm The Gold (c)Rush
If bloody sights turn your stomach, then avert your eyes from gold miners. GDX got destroyed on Thursday, falling 4%. Let’s see if support holds.
Video of the day
JEDI Options
Coach Tyler analyzes a Naked Put on the Energy Sector ETF $XLE and compares it against a long call in this Jedi Options video.
Today’s line up
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Halftime Report 12:30 PM EST
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Cash Flow Club 8:30 PM EST
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