What should traders look for when identifying a profit target?
Always consider a trade’s risk-to-reward ratio. While identifying risk involves setting a stop to minimize risk in a losing trade, identifying a trade’s reward involves setting a target where you will look to take profits from a winning trade. I typically look for trade candidates where there is at least a 1 to 1 reward versus risk, i.e, the reward should be atleast commensurate with risk. In other words, if I were to enter a long position at $20 and determine my risk/support level to be at $19 (a $1 loss per share), I would want to target a minimum price of $21 (a $1 profit per share), or one times the risk per share. If through my use of technical analysis price pattern forecasting I determine that it is probable the price may reach $21 or higher in the timeframe of my trade, I may elect to enter that trade. Also remember to never risk more than 45% of your account equity on any one trade. If you risk say 45% of your trading capital on each trade and proceed to lose this amount on tw
