How Price Targets Shoot You in the Foot

Establishing price targets hurt your trading performance.

Human beings are “bad” at prediction. There is not much science in guessing where a bull or bear run will end. Previous highs don’t necessarily infer a price point where a rally will stall.

Fundamentals do matter.

Institutions – the biggest traders in the crowd – place their wagers based upon fundamentals and their overall business. With billions of dollars on the line, they’re not much concerned with intraday price data. There’s no reason you should either.

Much of what institutions do on the commodity side is based upon DATE, not PRICE. Follow the elephants, not the piker traders dancing between their feet.

If you don’t have a simulator, you can trail structure with a protective stop. You’ll make much more money staying in your winning trades, rather than cauterizing them too prematurely. Plus, you save time in that when you wake up every morning, you already have winners in your portfolio. Leave them there.

Place your protective stop on your unrealized gains where you’ll be financially and psychologically ok if you stay in the trade and eventually get stopped out.

You can ask yourself “How much of my unrealized gains am I willing to risk in order to stay in the trade longer?” The recent bull move in the S&P is a good example of how you can (and should) let your winners run.

Once you experience this a few times, you’ll become very comfortable with this strategy. You’ll come to find that “you didn’t have to do anything extra” to make the additional gains.

Sit on your hands and forget price targets. Let the market tell you when the move is over.

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Please note: I reserve the right to delete comments that are offensive or off-topic.

  • Tim Thomas

    The feeling of ‘living with uncertainty’ gives a me a lump in my throat and an emptiness in my stomach. I feel the urge to reach out to something solid to keep me from being hurled about.

  • martinkronicle

    What is the feeling around being “hurled about?”

  • Tim Thomas

    For me, it’s easier to act out the feeling, there’s a better translation between feeling and action than feeling and words. My inarticulacy can get in the way of doing those feelings justice. I’ll take this to the next Tribe meeting nevertheless, the feeling of being hurled about is a mesh of emotions the overwhelming one of which is wanting validation of me to myself and to the world. My Tribe leader will ask what positive intention can be found from all of this. The answer is that I see them as indicative as me following my process. In other words, I’m allowing those feelings to be ‘there’ and to stay there, they’re one character of the process I’m following.

  • martinkronicle

    Approved