Day trading and taking of profits (Exit strategy)

In the different aspects of trading, the easiest part is entering a trade but exiting a trade which is the last part of a trade, can be especially hard to determine. Based on the type of trade, traders can be closed out of business following a predetermined set of conditions. In choosing the exit point, the commonly used term is profit target, which is identified as a price level within which traders would close their trade. The article emphasizes profit targets using immediate edge as the optimal platform for transacting, especially when setting the exit points and essential insights provided by the platform, which allow for increased profits. 

The reason behind trading with profit targets

In trading, regardless of the type of trade, the emotional aspect, which is the most significant limitation, must be fought with all existing strategies. The best strategy for overcoming the emotional aspect of trading is using a profit target, which calculates the risk/reward associated with the involvement in a specific trade. When talking about the profit target, stop-loss comes into play which is used as a determinant of the potential loss of a trade. In any trade, investors and traders are advised to have the reward potential outweighing the risk. Online trading allows for participation in different trades, and for an overall profit to be assumed, the overall profits should be higher than the losing trades. Trading following profit targets allows for determining which trades are worth taking and has been identified as an effective way of filtering out trades that are not worth investing in. 

The advantages and disadvantages of having profit targets

There are both advantages and drawbacks of using profit targets and including; 

Advantages

  • Setting a specific profit target or a stop loss is a great way to determine the risk or reward of a trade even before the order for the trade is placed. The determination allows for essential investment decisions affecting future trading and investment opportunities. 
  • Significant sources allow important trading decisions based on historical data like price charts.
  • Using profit targets is also an effective way to remove emotion in trading. It makes traders more confident as the profits or losses are not based on speculation but on rational and objective analysis data. 

Challenges 

  • One of the most important considerations before making a profit target is the required skill which should be free from hope or fear.
  • Online trading and transactions are highly volatile; the profit targets may not be reached in some instances. In the above events, prices may begin to move upwards and then reverse course before hitting the intended markets. In making profit targets, it is essential to not place them too far because of the limitation of not achieving them or placing them too close because it also limits the compensation of traders for the risks they are taking. 

Placing the suitable profit targets

Placing profits can be compared to balancing because of the need to use a risk ratio to determine where to make loss points or profit targets. The decision is affected by the entry points, and numerous platforms like immediate edge provide insights using traders’ information. Such platforms use how much was invested in a single trade to determine the optimal fixed targets; short trades, among other variables, can predict the expected range or specific profits. Chart patterns and other variables can estimate how far prices can move using existing patterns based on historical data. An example is the use of triangle chart patterns alongside day trading strategies. The triangle model forms when prices move in smaller and smaller areas over time, and the left side, the thicker side, can be used to determine how far the prices are likely to go before a change in the markets.

Zaman Lashari
Zaman Lashari
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