Setting Logical Price Targets and Managing Trades

Filed under: Learn Forex Trading |

 

Screen shot 2013-04-05 at 13.29.15Today, I touched on the issue of setting logical price targets in the forex markets, and I would like to talk a little more about this issue in some depth right now, along with the general issue of managing trades.

 

Most traders realise that stop losses have to be set at a logical place in the market (such as beyond an area of support/resistance), but it seems that price targets are given much less attention. Just like stop losses, price targets should be placed at a logical level in the market (such as before the next support/resistance zone) so that they have the best chance of being reached. If you place your price targets beyond the next level of support/resistance, then the probability of that price target being reached is significantly reduced.

 

Once a trade is in play – there are two things that you can do. The first is to employ a ‘set and forget’ strategy, and let either your stop loss or your target be hit without looking at it again. Or, you can manage the trade depending on what the market is telling you.

 

Charts tell a story – a narrative that constantly unfolds; but there is a danger that you can over-manage trades and make decisions based upon emotion. However, if you make a trade on the daily chart (for example), then it might be prudent to look at the close of each candle, and determine what the market is telling you. If you take a short trade, and the market is giving a bullish signal, then it might be a good idea to move up stops to protect any profit. Alternatively, if the market moves in your favour very quickly and with a lot of force, then it might be a good idea to increase your profit target and let the market run.

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