Remember that just like your stop losses and risk per trade, your profit targets are also at the sole discretion of you as a trader. Any trim/exit updates in our Alert Room are merely suggestions from our team.
If you’re not sure of what profit target you should be setting, our team has some suggestions and recommendations (note: dollar amounts are for illustrative purposes only)
Double your Stop Loss % → for example if you’ve entered into a trade for $100 and your stop loss is set at 10% ($90), you may want to consider setting your profit target at 20% gain ($120).
Recover your Principal → this tends to apply more in situations where multiple contracts/shares have been purchased. Recovering your principal investment in a trade reduces your risk of loss on that trade to $0, and is a great way to manage risk!
For example, if you bought 10 contracts at $20 each (for a total of $200) and the price of the contracts goes to $25, you could sell 8 of your 10 contracts for $200 ($25 x 8), and recover your initial investment. Now you can’t lose any money on this trade, and you can sell the remaining contract at any time to lock in your profit on the remaining two contracts.
Exactly what price you need to sell at in order to recover your investment will vary, but some guidelines are as follows:
- If you are up 25% on a trade, you would need to sell 4/5th of your position (or 80%)
- If you are up 50% on a trade, you would need to sell 2/3rd of your position (or 67%)
- If you are up 100% on a trade, you would need to sell 1/2 of your position (or 50%) note: if you are up 100% on a trade, it’s also never a bad idea to lock in your profits and exit the trade; you’ve just doubled your investment!