Secret to identify short and medium-term targets

Quite often, traders miss out on an opportunity to remain in the rally and book profits early. Despite a successful trade, a trader remains unsatisfied and wishes only if he could have stayed in the position, he would have made greater profits. Has it happened with you too? Don’t worry, we will tell you how to correctly set the target levels and keep riding the momentum.   

During swing trading or positional trading, it is of utmost importance to predefine the target as well as stop-loss levels. With the help of the price objective of the pattern, one can identify the appropriate level of targets as well as stop-loss. So, what exactly is the price objective?   

The price objective is nothing but an analyst projection of a security’s future price. There are various methods to understand the price objective of the pattern. One such method to understand price objectives is by measuring previous rally. Stocks tend to consolidate before another rally emerges. So, the analyst takes the previous rally as a reference and the measurement of the previous rally would then be plotted from the breakout level to get the target level.   

In the case of breakout patterns like Head & Shoulders or Cup pattern, it is the distance between the head and the neckline in the case of Head & Shoulders along with the depth of the cup that decides the target level for the patterns. This measure of the depth is then plotted at the breakout level to get the desired target levels.   

Fibonacci retracement is also one of the widely used techniques to determine short-term as well as medium-term targets. Fibonacci retracement level is first plotted on the stock and then the levels of 1.382, 1.5, 1.62, and 2 times are found to be short as well as the medium-term targets for the underlying asset.   

Also, depending upon the market conditions and stock strength, it needs to be decided whether to book profits partially or fully. Thus, understanding price objectivity is of utmost importance to a trader, and one should keep a healthy practice to analyse price objectivity before jumping into trades. Such important practices and decisions help in making good trading decisions and maximise your profits!