Take profit: setting profit targets

A profit target is a price level on a chart that you set to take profit.

Choosing a profit target is a key part of your trading strategy – it requires you work out in advance exactly how much risk you are prepared to take for how much potential reward.

Profit targets are actually the most important part of your strategy, because it is not your entries where you make a profit or loss, it is your exits. You need to be able to determine a suitable profit target for your trading – one that gives you a realistic profit target, but also gives you a sensible risk to reward.

There are countless ways in which you can set your profit target using technical indicators and other tools. We will show you two easy ways to set your profit target: support and resistance, and daily range levels using the ATR indicator.

Using support and resistance to set profit targets

Support and resistance is a powerful concept used by traders to read and interpret price action. It is based on the theory that the price may struggle to break above certain resistance levels or below certain support levels. You can use this to determine profit levels.

Using resistance

If you are in a long trade, key resistance areas can be a good place to set your profit target levels. If you are in a short trade, support areas can be a good place to take profit.

The chart below shows an example of how resistance can be used to take profit when you have a long position and prices are moving upwards in your favour:

As you can see in the chart above, after the initial entry into the market comes a favourable move up to a level of resistance. At this point the price begins to stop and may even reverse direction.

In this example, you should look to take profit where the price first reaches the level of resistance.

Using support

The chart below shows an example of how support can be used to take profit when you have a short position and the market is moving down in your favour:

As you can see above, after the trade is entered, the price moves downwards to a level of support. At this point the price struggles to break below the support level and may even reverse.

In this example, you should look to take profit where the price first reaches the level of support.

Different types of support and resistance

Support and resistance is not confined to horizontal support and resistance only. For instance, you can use pivot points, trend lines and channels as they all present support and resistance in one way or another.

What you are essentially doing is finding out where the price is likely to stop and taking your profit at that point.

Using daily range levels to set profit targets

Another effective way of working out your take profit levels is by using daily range levels.

To identify daily range levels, you can use the average true range tool. This tells you exactly how far you can expect a price to move on any given day based on recent price movements.

Apply the average true range (ATR) indicator to your daily price chart, as shown in the image below:

For a long trade, once you have entered your trade you can use the value of the ATR to place your take profit away from your entry.

The image below illustrates this process:

For a short trade, once you have entered your trade you can use the ATR value to place your take profit away.

The image below illustrates this example:

The importance of risk to reward ratios

A risk to reward ratio is a measurement of how much profit you are anticipating in exchange for the maximum potential loss you can suffer.

When setting your profit targets it is very important to trade with a positive risk to reward ratio.

When a setup occurs that does not offer an appropriate risk to reward ratio, it is always best to leave the trade and wait for a more profitable scenario later on.

Forex Trading Facts To Win Big Profits

Here are your facts in no order of importance they ALL contribute to your success!

Fact 1. Forex Trading is NOT Easy!

Of course it isn't that's why so many traders lose - 95% but the good news is with a bit of effort, you can win and make a lot of money. You simply have to know what you are doing (forget junk robots and mentors telling you it's easy to follow them), if you do you follow them, you will lose. 

Understand you need to do it on your own - but if you do put in effort, your rewards can be huge and this does not mean working hard. 

FACT 2. The Work Ethic Does NOT Apply 

In many jobs you get paid for the hours you work and are rewarded for the amount of time you spend working. In forex trading you get your reward for being right and this means working smart not hard. 

You can learn to trade in about 2 week and in 30 minutes a day or less and earn big profits. Start to trade, click here. 

FACT 3. Being Clever is NOT an Advantage 

Simple forex trading strategies work best try and complicate your trading system and it will have to many elements to break and will lose. Keep it simple is wise advice when seeking forex profits. 

Fact 4. Discipline is the Key 

You need to have iron discipline, this is the hard part of forex trading, to trade through losing periods and stay on course, until a winning run occurs. If you don't have discipline to follow a system - you don't have one!

FACT 5. Picking Trend Direction is Easy 

Compared with staying with the trend. When you trade you must execute your trading signal at the correct level and have your stop and trail your stop so you don't get stopped out by volatility - this is much harder to do and many traders get the direction right, only to be stopped out by random volatility and see the trend go back the way they thought and their not in. 

This is a major problem and you need to make a study of standard deviation of price, part of your essential forex trading education.

FACT 6. You need to Know Your Trading Edge 

A trading edge is personal to you and something you understand, have confidence in, which you know, if you apply with discipline, will lead you to currency trading success. 

Following someone else is not an edge! Its personal and if you don't know what yours is, you don't have one. 

FINALLY The Good News ...

Forex trading looks easy yet, few succeed but if you understand the above points you are well on your way to achieving forex trading success. 

You have to work and you have to work smart to get a forex trading system, you have confidence in and can apply with discipline. If you do this correctly, the rewards can be life changing.

Becoming a better forex trader

The beginner strategy is just the start of a whole world of trading. From indicators to chart analysis, there are many opportunities to learn and improve your trading.

However, there will always be a core group of principles that you need to comprehend. Grasping these three basic forex trading concepts allows you to make smarter decisions while you are trading:

• Technical analysis
• Money management
• Trading psychology

Technical analysis

Technical analysis is a method of analysing price movement on a chart to determine possible future price action by using things like indicators, channels, divergence, and much more. I teach you how to analyse Japanese candlestick charts using many different methods. The strategy you use will depend on your personal trading style.
For example, one trader may prefer to use moving averages while another may choose to use the Fibonacci indicator.

You can know more about Technical Analysis from my old post .

Money management skills

Money management, also called risk management, is a core concept that protects your trading capital from losing trades. It should be part of your trading strategy immediately when you begin your trading career.

Money management encompasses concepts like stop losses, scaling in and out of trades, and risk to reward. Understanding these methods can help you maximise your profits and avoid losing your trading account.

For example, most professional traders do not advocate risking any more than 1% to 2% of an account on a single trade. This protects your account from performance downturns and allows you to trade safely with leverage.

Trading psychology

It is not analysis of the markets alone that allows a forex trader to become successful, it is the psychology of a trader. By overcoming psychological influences, such as fear and greed, a trader has a better chance of being successful.

A trader must stick to the rules of their system and not let psychological influences distract them. The path to becoming a good trader is not necessarily an easy one, however, working through your psychological issues will allow you to trade with a disciplined approach.

How To Become a Good Trader

Traders are not born – they are made

Starting out as a trader can be daunting. With so many strategies, principles and concepts to learn and choose from, it can be difficult to pick a path and stick to it.

Trading can also be an emotional roller coaster, taking you from the thrill of winning to the anxiety and self-doubt of losing in one short session.

An experienced trader knows how to stop emotion influencing trading decisions – becoming capable of jumping straight back in the markets even after a loss.

These are not skills that any trader was born with though. They are skills that are acquired through study, discipline and practice.

How to become a good trader

Learning to trade is not an easy journey, but it is one that many have made before you.

We will now look in more detail at some of the ways you make this journey easier.

Practice trading strategies

Just like a concert pianist has to work hard at perfecting the basics before he performs a concert, it takes practice and dedication to become a winning trader.

The difference with trading is that the process of practising – learning from your mistakes – can cost a lot of money. This can be psychologically and financially hard to take.

Demo accounts are therefore a must for beginners. They allow you test out strategies and different trading methods in real market conditions, but without risking real money.

Moving on to real money

After you have practiced your strategies and are comfortable with how to execute your entry and manage your trade, you are then prepared to work on the next stage of learning, which is to control your emotions.

Whilst a demo account can mimic the emotions that you feel when trading real money to a certain extent, you will not experience the full brunt of emotional influence until you move to a real trading account.

If you have practiced a strategy on a demo account beforehand, then you are in a better position to learn how to control your emotions, because you have practiced the decision making to the extent that it is almost automatic and you simply need to concentrate on taking a series of trades and get used to the emotions.

Break it into bite sizes

Experienced traders incorporate technical or fundamental analysis, risk management and strict entry/exit rules into every single trade they make.

They know that by applying each of these elements consistently, their trading will produce favourable results over time. They also know that skipping any one of these stages could ruin their strategy and lead to heavy losses.

If you are a beginner trader, trying to master so many links in a chain at the same time can feel overwhelming.

Therefore, don’t expect to learn a trading strategy in one go.

Rather, work on different elements of each strategy in bite-size chunks until you understand them and can fit them together like the pieces of a jigsaw.

For example, dedicate yourself to studying and experimenting with different money management principles until they feel second nature. Then move on to the study of entry or exit levels.

Approaching your education in this way will not only give you a much clearer sense of direction, it will ensure that you are making the best use of the time you dedicate to trading.

Of course, you will still have losing trades, however, as long as you know that you applied each trading rule carefully and consistently, any losses will be easier to digest.

Master your emotions

It is vital when trading to keep a firm focus on what you are trying to achieve long term.

Many traders start in the industry because the flexibility of trading for themselves might improve their lifestyle. Others do so because they want more control over their earnings potential.

Whatever your reasons for trading, remind yourself of them regularly. Write down your goals and stick them on your wall so that while you are learning and going through the difficult process of mastering your emotions, you can always refer back to your aspirations.

Reminding yourself, for example, that your whole reason for trading is that you can spend more time with your family can make it easier to put in perspective the disappointment and stress of losses when they do occur.

Reminding yourself of how much income you hoped to earn from your trading can also be a great way of refocusing your attention and getting you back into the market.

Take emotion out of your trading when you are actually trading

However, you must make sure that you are in a logical mindset when you are trading. You must be able to let go of emotions and you need to learn how to only think about the trade and only refer to your goals and dreams afterwards.

The reason why is that you do not want to influence your own trading. Take, for example, the scenario of experiencing a losing trade whilst thinking about the money that you hope to make with it. The losing trade now makes that dream seem further away and you are in danger of getting caught up in chasing losses.

This can lead to warped expectations, which can result in chasing losses.

One way you can overcome this is to write down your trade beforehand. By writing down your entry, stop loss and profit target on a piece of paper, you begin to switch your mind into a logical state and concentrate more on the trade itself, rather than what it is trying to achieve. You are then in less danger of becoming influenced by emotion.

Are you Losing Wasted Money or Earning Extra Money?

Important Forex Tip – What’s the currency held in your broker?
This is one very important thing that every forex trader should know.What’s the currency that you hold in your forex broker account?Regardless of which country are you living in.Your currency denominator in your forex account should NOT be in USD.This may come as a BIG Shocker to you.And if your denominator is in USD. Change It Now!

Important Forex Tip – What’s the currency held in your broker?

Here’s why:
My Example: I’m based in Singapore. Around 2-3 years back, the USD to SGD (singapore dollar) is at the rate of 1 : 1.4 (est)
Forex Blog: Therefore $1 USD is equals to $1.4 SGD.
Forex Blog: But today $1 USD is equal to $1.1~ SGD.
So had my forex account denominator be held in USD. I will be making a huge loss!Just for example. If your capital is $100,000 USD 3 years back, if i convert it back to SGD. It will be $140,000 SGD.And supposedly, if i never traded the account. Today my capital left will be $110,000 SGD.Meaning i made a loss on my account even though i did not even took a single trade!
Do you see what i’m driving here.Even though if i had traded the account, my profits would have been wiped off or massively reduced due to the currency difference.Which also means that you are practically wasting your time trading forex as none of your profits could be seen.

So what now?
Here’s the fact.
The USD will continue its way down, unless there is a chance of them clearing the trillion of dollars in debt. (chances are really slim)Til then, the USD will at least not grow back to what it once was.So if you are living outside of the United States.You should either put your currency in your own country’s denominator or place it in a country which has a stable economy (eg. Singapore is one of them) And if you are living in the United States.You should change your denominator to another country which has a stable economy. (Not EUR – due to its mounting debt)
Some brokers will not allow the change if you are living in the United States but some will.So if those brokers doesn’t allow you to change your denominator to other currency.
CHANGE THEM!

By changing your denominator to other currency, and if the USD continues falling against the currency you put in.You will see a growth in your capital without even trading!So that’s Extra Profits! (or even to cover your losses you made through silly mistakes)Let me know if this post has helped you.Do share it and like it! Cheers!

Click here to check out our online forex trading.

Forex Brokers: What to Look For

You should not rush to choose a new broker. We recommend that you take advantage of several free demo accounts and compare them carefully before you commit to one. You should also read our reviews, peruse a few forums and find other resources to further educate yourself about the broker. To help you make an informed selection, we compared trade details, brokerage types, funding options, trading platforms, and help and support.

Trades
While volume investors fuel the majority of the $4 trillion dollar per day foreign exchange market, increasingly opportunities are opening up to lower-volume investors. In the past, minimum deposits were in the thousands; now you can fund a new account with as little as $100. This low deposit requirement gives you the opportunity to test out a few services without having to risk large sums of money. Most forex trading brokers also require only a 1,000 minimum trade lot size. If you are trading from the U.S., leverage is limited to 50:1; however, if you are trading from other countries, you may be able to leverage as much as 400:1. In terms of trading pairs, brokerages offer a choice of 30 to more than 60 trading pairs. While you may not choose to trade more than 60 trading pairs, you will want to verify the trading pairs available to ensure that the ones you are interested in are accessible through your selected broker.

Brokerage & Funding Options
Before selecting a new broker, you should consider the broker's reputation, funding and payment options, and all associated fees and interest. While conducting our research, we noticed that withdrawing money seems to be trickier than depositing money into your account. Keep in mind that it may take days or longer to retrieve your funds, so you should not trade with money that you actually need. It would be prudent to investigate customers' experiences with withdrawals before signing up with a new broker. Also, be careful to note what type of broker they are and what governing agencies the broker is regulated and licensed by.

If you are a day trader, you may not have to worry about interest rates. However, if you hold a position overnight, the broker will charge you interest. For Muslims, most offer interest-free accounts that charge a fee rather than interest. Other fees to consider include wire-transfer fees, margin rates and routing fees.

Trading Platforms
Most forex brokers offer MetaTrader to their clients as the trading platform. If you are an experienced trader, you are likely already accustomed to using this popular trading platform. Those that offer MetaTrader also provide access to the mobile version. All platforms are now web-based, and many brokers offer their own proprietary trading platforms as well. If you are trading with a market maker broker, it is recommended that you monitor a few trading platforms to ensure that they are offering you fair deals.

Help & Support
Although nothing can replace extensive research and experience with a broker over an extended period, we did compare how easy it is to contact the forex brokers and what kind of education they provide. The best forex brokers offer telephone and email support during generous business hours. Many also provide limited chat support. All services provide free demo accounts so that you can practice trading strategies and using the trading platform.

Forex trading involves a high amount of risk, so we recommend that you educate yourself as much as possible before you start. The top brokerage services provide documentation, videos and tutorials to help you learn how to minimize your risk.

GCM is a group of elite markets traders, experienced in trading the world’s largest financial market with huge turnover volume in a day. We foresee that the future trend in the capital markets, gold futures will continually transforming and challenging world of online trading. Hence, GCM is committed and will be one of the most outstanding trading services provider in the region.

 

Price-to-earnings ratio (P/E)

A company's price-to-earnings (P/E) ratio tells you how much investors are willing to pay per unit (£1, $1, €1) of a company's earnings. For this reason, it is sometimes nicknamed the "price multiple" or the "earnings multiple."

It is calculated by dividing its market value per share by its earnings per share:

PE = Market value per share/earnings per share

For example, if a company's stock is currently trading at £40 per share, and its earnings per share have averaged £2 over the previous four quarters, its P/E ratio for the year would be 20.

This means that investors buying the stock now need to pay £20 for every £1 of earnings generated by each share.

P/E shows the desirability of the company's shares compared to other companies

The P/E ratio therefore tells us how attractive a share is relative to other shares. The higher the P/E, the more money shareholders are prepared to invest for the same £1 of earnings

This gives P/E its most important use for equity investors – it helps them decide whether a company's share is overpriced or underpriced compared with the company's real, fundamental value and with other shares in the same sector.

Caution with very high P/E figures

A high P/E ratio may indicate a share is overpriced, in which case you may decide to sell it on the expectation that its inflated price will soon collapse and it will fall back to its real value.

Conversely, a low P/E ratio may indicate that a share is underpriced or cheap, in which case you may decide to buy it on the expectation that other investors will soon become aware of its fundamental strengths and its share price will rise to its real value.

Generally, a P/E lower than 15 indicates that a company's shares are currently undervalued, while a P/E ratio higher than 20 indicates that its shares are overvalued.

Take into account the industry and size of the company

This is only a very loose rule however, as P/E ratios tend to be different based on the industry in which a company operates and on its size.

Technology companies, for example, tend to have higher P/E ratios than other sectors because their growth rates are usually higher and they give investors a higher return on equity. In contrast, utility companies tend to have a lower P/E ratio.

Consider P/E over time

Another way of using P/E ratios is to look at a company's P/E over a period of time.

If, for example, a company's P/E ratio has risen significantly higher than its historical average P/E ratio, and you cannot find fundamental reasons to justify that – for example, a hot new product – this may indicate that its shares are overpriced and now might be a good time to sell.

The same can be applied to entire sectors. If, for example, the average P/E ratio of pharmaceutical companies has dropped significantly below its historical average, and you can find no fundamental reason to explain this, it might indicate pharmaceutical shares in general are currently underpriced. This means that now might be a good time to buy pharmaceutical shares.

At this point, you could apply the P/E ratio to individual companies in the pharmaceutical sector to work out which in particular seem most underpriced.

Bear in mind that, similarly to the EPS ratio used in its calculation, the P/E ratio relies on companies reporting their earnings accurately.

It is of course possible for companies to manipulate their earnings, so the P/E ratio should never be relied on as your sole indicator before deciding whether to buy or sell a share.