Setting profit targets

[MongiIG]

[MongiIG]

[MongiIG]

Establish Your Baseline Trading Targets, and Make Sure to Maintain Them

In 2021, I became sloppier with sticking to my established baseline trading targets. These are derived from your risk-reward ratios and include the maximum you are willing to take a loss on any given trade as well as the minimum target profit. Had I remained consistent with them, I would have walked away from 2021 a better trader. These further underscores the importance of risk management. After setting up a proper trading strategy, maintaining consistency with your risk management is the key to improving yourself as a trader.

In an ideal world, one would be able to cut their losses short and let their profits run as much as possible. This is as opposed to a specific 2-to-1 or 3-to-1 profit/loss ratio target. With effective stop-loss management, cutting losses short can be achieved without much of a hassle. Getting your winners to run beyond your baseline target is trickier, as markets often don’t move in a straight line. Before you can even get to that point, in my opinion, a trader should first be able to maintain consistent risk management by sticking to their established targets.

 

Jan 11, 2022 |  Daniel Dubrovsky, Strategist. DailyFX