To Get Paid
As we wrap up another trading week I want to talk about something that a trader can really struggle with.
Trading targets, Gang.
Now targets are basically ending the open loop of an open trade.
And here’s why they matter so much…
STEP ONE: Targets Get You Paid
Targets are where we pay ourselves. So if you get your target wrong, how are you going to get paid? That’s the reason we’re trading, right?
Our number one job is to pay ourselves!
I know a lot of people talk about how our number one job is to protect capital, but I think if you grasp the understanding of knowing when to pay yourself, protecting your capital is a whole lot easier.
STEP TWO: A Recent Nasdaq Trade
So let’s kind of shift that whole job number one to knowing your targets and not getting greedy about it.
To illustrate what I mean, I’ve included a video below walking you through a Nasdaq trade from several days ago.
Check it out in the video below…
Taking a look at that Nasdaq trade, we had our breach, which triggered our long bias (or our bullish bias). I highlight the breach in the video for you. Then subsequently these retreats where we close the distance to our zones.
So then you need to pay ourselves. Great.
Naturally, we have an open trade, and at some point it becomes an unrealized winner. So we know that there’s resistance because the clearing range high has told us that there’s resistance.
Those key areas of resistance I think are really good targets.
On the video above, you can also see that we have a value area high. That’s a volume and price important level. Plus the clearing range high, which is another price-based important level.
Notice… that if you didn’t use either of those levels to take profit moving forward, how many opportunities did you get?
Only a few.
STEP THREE: But What if You Don’t Do Your #1 Job
However, not everyone does that. So okay let’s say you were stubborn there. Wow, the market can keep going up. It looks like it’s going to be an up day (blah, blah, blah).
Now in this particular instance, the market was kind enough to give you one more shot at that value area high… but then what happened?
Womp womp womp.
This is why we don’t overstay our welcome, and this is why you need to be so disciplined about that first target. Too many traders get very greedy, too greedy for that first target.
So how do you avoid that?
Make sure once you get into your trade, you ask yourself, where is it likely the market’s going to run into a stack of sellers. Once you know that, you want to pay yourself in front of that, move your stop to a breakeven and do your number one job.
Pay yourself, Gang!