What are targets in crypto trading and how can they be put to use

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Professional traders use targets as a means to determine when to place buy and sell orders on the order books of the exchanges they use.

In short, targets are a traders way of ensuring that profit or loss is taken at right time to avoid staying in a position for too long and preventing unnecessary loss.

If you are a day trader navigating these markets, your ultimate goal would be to look for different windows of opportunity which allows to quickly extract gains from the market.

Getting to find positions that you can quickly get into and out of all the while extracting little profits here and there is the work and the only realistic way of making this happen is by setting targets based on your perception of the market.

The easiest way to set targets in a market is by using support and resistance levels to identify points where an uptrend might become a downtrend and vice versa.

It is a simple process actually, but due to the complications that come with identifying true support and resistance a newbie trader might experience some difficulties with setting targets.

Other ways you could set targets is by using different indicators such as Moving Averages and Fibonacci sequences but even that would require some advanced knowledge on chart reading.

Types of targets

There are three different types of targets that can be set in a trade setup

• Buy target
• Sell target
• Stop-loss target

Buy Target

A buy target is the price at which traders take an entry position in the holding of any coin or a particular asset in the market.

What makes a price suitable as a buy target depends on a number of factors, such as previous price levels and price reactions in the market.

Let's assume that the current price of Ethereum against the US Dollar in the market is $205, a trader might decide to set the buy target at $203 if there is any indication from the technical analysis conducted that the price of Ethereum might fall to $203 and then rise after falling to that point.

If that be the case, the trader might set a limit order on the order book to buy the Ethereum when the price hits the buy target.

Not all trades require setting a buy target, at least in my experience. There are trades where I personally make entries at the current market price if I have reasons to believe that the price of the asset is on its way up.

Sell Target

A sell target is a point where traders sell their holdings on any coin/asset after their trade has become profitable.

Basically, after taking a buy position on a coin the next thing to do as a trader is to look for a target price where the sell order for the coin will be placed in order to take profit on that trade.

A sell target is usually a point on the price chart where the trade has become profitable.

From the above example, let's say we take that ETHUSD position and we enter at $203, based on how the market is moving we can set virtually set the sell target at $208 giving us a 5% profit roughly.

So if the price hits $208, we can then sell for profit.

One thing to note is that not all trades will hit their target and some trades also end up surpassing the set targets, some trades will under perform while some will overperform.

The best thing to do in situations where a trade has become profitable but hasn't hit the set target is to watch out for indicators that will provide signals as to where the market is so you can be notified about when to exit a trade, targets regardless.

Always have a sell target in mind when entering a trade.

Stop Loss

This is easily the most important target to set in every trade.

As a trader, you have to keep your emotions in check if you do not want to record more losses than normal.

A stop loss is a point on the price chart below the entry point of that particular trade where the trader places a sell order in case the asset being held starts losing value and the trade becomes a losing trade.

The essence of a stop loss is to ensure that the trader doesn't lose more than they are willing to risk on that trade.

Let's face it, not all trades will be profitable, your analysis will not always be on point.

The only way to prevent unnecessary loss in the market is to set a price below the entry price such that when the price of the asset hits that point a sell order will be placed.

So if as a trader you are willing to lose 1% of your bankroll in a trade, all you have to do is set your stop-loss at a price which is 1% below your entry price.