Targets can be placed in different ways. The most popular method involves identifying support and resistance levels and placing a profit target at the resistance value and a stop-loss order just below the support value.

Support and resistance levels can be identified in a rudimentary way by placing a trendline across the peaks and dips on your price action graph where price reverses in the opposite direction.

It’s also possible to establish support and resistance levels and place profit targets using a pivot point analysis. A pivot point takes the average high and low closing prices from the previous day and uses them to establish a current trading range—that is, support and resistance levels. In a strong trend, price will continue to break its previous resistance threshold, creating a stair-like pattern as illustrated.

By placing your profit target at the established resistance level, you’ll lock in profits each time price breaks this range, thereby continuing the trend. Using the width of the current support and resistance range as a guide, traders also attempt to predict secondary support and resistance levels at which to place new profit targets and stop-loss orders.

It’s also possible to place profit targets using the average true range (ATR), an indicator that measures price volatility. ATR values reflect the average change in price that a currency pair experiences in a single day. By adding the ATR value to the current market price, you can set a realistic profit target for the upcoming day.

Although support and resistance levels, pivot points, and the ATR can all help you determine profit targets, it’s important to remember that these are just estimates. In order to place them more effectively, you must understand the market and be able to recognize the strength and direction of the current trend to identify when a reversal may be imminent.

Looking at the same AUDUSD 4hour chart, we can see how taking partial profits would have worked marvelously in this trade example. Since this is a long trade example, resistance levels should be used as targets. For short trades, of course, support levels should be used as targets.

Profit Targets are set at each resistance level from the previous chart. You can see how, at some points on the chart, the horizontal resistance is at confluence with the channel resistance. These are excellent points to lock in partial profits.

Partial profits are a great tactic because they let us capture maximum profits during long trends while making profits and reducing the risk at the same time. We can see that the 3rd target was not reached and the price instead fell through the support trendline. Nevertheless, all three parts of the position were profitable in the end.

Another effective technique for taking profits is the “trailing stop”. This is a strategy best used during strong market trends or if you are a trend trader. The trailing stop trails the price with a fixed Stop-Loss size. So, for example, if you set the trailing stop at 50 pips, it will trail the price at a fixed distance of 50 pips and as the trade moves into profit more and more so does the Stop-Loss by the same amount.

By this example, if the trade moves 200 pips in your favor your trailing stop will trail the trade at 50 pips – locking in a nice 150 pips profit. At the point when the price moves 50 pips against your direction, the trade will be closed. The main disadvantage with this strategy is that it’s lagging and it tends to give away a sufficient amount of profits. Some traders don’t like this and they prefer to use a leading indicator to place profit targets, like Fibonacci projections or pivot points.

Still, at the true mastery level, it is possible to combine the two and use the trailing stop as protection until the final target is hit at which point the position is closed without waiting for the trailing stop to be hit.

Once you fully understand the fact that each trade has a completely random outcome and that we can’t control the market in any way, you’ll find it easier to accept losses and will not have any expectations concerning the trade’s outcome. Once you completely embrace this fact, you’ll feel immediate relief and you’ll stop chasing the market for winning trades.

Take a look at the chart above. The price reaches close to a resistance line, giving two possible outcomes to the trade: the price will either break the resistance line and go up, or retest the resistance and go down. If your trading strategy is well-rounded and combines fundamentals with technical’s, you may have a slight edge in predicting what the market will do next.  Whether or not one single trade is profitable or not it’s not in your hands. You only know that, after a series of trades using a high-probability strategy, you should eventually make a profit. Casinos have a similar approach. They know that the house always wins in the end after hundreds or thousands of games, but don’t know if a single roulette game will be a winner or loser for them.

When you enter a trade, you need to be aware that its outcome is almost completely random. Even the best professional traders at investment banks have a winning rate of slightly over 50%. This means that we can’t control the outcome of a single trade; it has an equal probability of being a winner and a loser. Although every single trade has a random outcome, traders can gain an edge with a large enough sample size by taking high-probability trades and utilizing strict risk management rules. Although markets do show signs of predictable behavior by forming downtrends, uptrends, and certain price patterns, it’s crucially important for traders to understand that each trade’s outcome on its own is a random, uncertain event.