Noticias del mercado & perspectivas

Using profits targets in trading, irrespective of trading vehicle chosen (e.g. Forex, Index/commodity CFDs, Share CFDs), is commonly discussed as potential exit strategy. The reality however is that these are often executed with a lack of consistency with ambiguity in trading plan statements.

This article revisits profit targets and outlines some key issues to consider in your trading plan. The terms “take profit” (or T/P on your trading platform) and “profit target” are interchangeable. What do we mean a profit target?

Like a stop loss, (though obviously related to taken a profit rather than a loss), a profit target is a pre-set price point (decided on entry) at which you have chosen to exit. The main two considerations as a trader are: When do I use a profit target? Where do a place it?

When do I use a profit target? Essentially there are three choices namely never, always or intermittently. These invariably tend to match three distinct trading styles of the individual trader.

Those who NEVER use a profit target tend to be shorter term traders (less than 30 mins time-frame) who are “in the market” for a set period of time during the day and will close all positions at the end of their ring-fenced time. Ideally there with associated use of a trail stop system. Those who ALWAYS use a profit target go across multiple time-frames, still using an initial and trail stop but often either use: Key price points i.e. placed above the next support if in a short trade or below the next resistance if in a long trade.

A multiple of risk e.g. if using a 2:1 ratio then x2 the risk level. Using this ratio as an example if your initial stop is placed 10 pips below entry in a long trade then the profit target is placed 20 pips above entry. Even if one is using key price points as your norm, this may be useful in those situations where no previous technical landmark exists e.g. when a price hits a new price high.

Those who PARTIALLY use a profit are commonly those who will trade without one whilst watching the market but when they move away will put one in place e.g. when holding a position overnight. So, your first choice is simple, which of these three is a ‘fit’ for you. Where do I place it?

We have spoken previously about the need to be specific in your plan to facilitate consistency and measurement. As with any other component part of your trading plan, your profit target is no different. Here are some suggestions: If you are choosing a key price point as your guide to placing your profit the be specific regarding how far away.

Please note: to use ‘Pips”/Cents/Points may not translate across time-frames e.g. in technical terms 10 Pips above a support in a 5 minute time-frame is very different relatively speaking to 10 Pips on an hourly chart. Therefore, it may be worth considering something like an ATR (or fraction of) which takes into account the standard movement in a particular time-frame e.g. 0.5 ATR above an identified support level. If you are choosing to use the concept of risk/reward ratio as previous discussed, then your placement of profit target is dependent on the initial stop level you set.

Then this becomes a simple maths calculation. So, absolutely clarity about how you are placing this initial stop e.g. technical landmark is the specificity that you need to work on. And finally… Bear in mind of course that: Other exit strategies that are part of your plan for open trades such as your initial and trail stop or your approach when there is an imminent economic announcement are still part of your decision-making, even if you have a profit target in place.

These need equal unambiguity when articulated in your trading plan as with your profit target. Once you have ‘planted your flag’ and of course traded your specific plan with a critical mass of trades, you are then in a position to test different parameters e.g. alternative distances away from a key price point. Your mission from here is to decide whether and how you are going to use profit targets and subsequent to write placement details in your plan...and then of course follow through with the discipline to trade it.

Mike Smith Educator and course facilitator GO Markets Disclaimer The article from GO Markets analysts is based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.

Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

When we first start to trade, or subsequently (as a more experienced trader) when we trade a new symbol or system we are often “excited” as we see a “hope” for better results. We often forget that the development of expertise in other areas we have in life (think about what you do in work now for example), you must invest time, effort, learning and making mistakes (providing you acknowledge and learn from them) to develop. This is not an overnight transformation, rather it may take several weeks if not months before you feel confident in your knowledge and skills.

It is bizarre therefore that we should expect anything different with trading development. To be clear, we respect and commend those who take the leap and move from demo to live account. After all, a demo platform ( you can trial a MetaTrader 4 or MT 5 demo account here ) will serve you in learning how the platform works, how to add indicators and get used to how markets move.

However, it is only when you start to have some “skin in the game” and are trading YOUR money, albeit with tiny positions to start with that you learn the most important lessons in trading and develop the appropriate mindset to begin to think about trading larger positions. All that been said, we see time and time again new traders or those trading a new system exhibiting three cardinal sins of the developmental trader, and decide to trade: a. With positions that are too big b.

Short cutting learning and system development c. Strategy skipping (i.e. moving from new system to new system) without meaningful measurement as to what works for you (and what doesn’t) or indeed whether the problem is YOU failing to trade a system religiously. These are all symptoms of impatience, of wanting to get massive returns quickly and without putting the hard yards in at the front end.

Remember this… The purpose of your trading when you start trading a live account should not be huge profit, rather it is to develop the confidence in your system, consistency in action and the measure whether what you are doing could be improved. Although it may seem strange to suggest, it is this and not, in the early stage of trading, the money (and level of profit) is most relevant in your potential lifelong career as a trader. It is through patience, and adhering to that initial purpose that you can gain sufficient confidence and competence to trade larger positions (after all it is just moving a decimal point to go from 1 mini-lot to a standard lot) and put the right foundations in to move forward.

Exercising patience to have the right things in place will serve you well for a potential lifetime of trading, to be impatient may mean your trading lasts but a few weeks or months. It is really that simple. Mike Smith Educator GO Markets Disclaimer The article from GO Markets analysts is based on their independent analysis.

Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs. Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

Obviously, one of the major differences between trading shares or share market derivatives (e.g. Share CFDs and Options) compared to other instruments such as Forex and Index or Commodity CFDs, is the daily set market hours and the risk of potentially significant differences in price between the close of one trading session and the opening of the next. GO Markets offer the opportunity to trade both Share CFDs on the Australian and US equity markets on your MT5 platform.

For reference, those of you that are new to this as a trading vehicle, the ASX opens from 10am to 4pm Australian Eastern time, whereas the US equity markets open from 9.30am through to 4.00pm US EST. Why gapping occurs Focusing on the ASX as an example, there are many events and economic announcements than can occur in the 18 hour “gap” between close on one day and open the next, as well as often the Australian markets responding to what has happened in the US “overnight”. This additional information is what creates the “gap”.

You will already have in your plan the need to be especially cautious prior to earnings release (or similar) for any companies due to report. Such releases commonly occur outside of market trading hours. This, more than any other situation, can create major ‘gapping’.

Recognising this is the case, many traders avoid entering trades in companies where this is imminent. Hence the inclusion of finding this out prior to entering any trade as part of your plan seems logical as part of your risk management. So, what can you do?

Although we cannot predict what will happen there are potentially “clues” that can be tested and may help in decision making relating to the market risk, (and so potential for major gapping). Remember these are “clues” only particularly relevant to short-term share CFD trading (and may be less of an issue for those intending to hold for the long-term). Such “clues” may help you make decisions on: Which direction to trade (e.g. long or short entry opportunities) Position-sizing approaches (e.g. if there are major announcements one may choose to enter smaller sized trades For efficiency in terms of your time, it could be argued that this “daily ritual” should be performed prior to looking at specific stock charts at the start of any trading day.

Here are five clues that you may choose to consider: 1. ASX trend including closing candle (daily chart) Experienced traders generally support the concept of trading with the trend as a common approach. Also, the closing price of the day is also thought to be the most important in terms of the buyer/seller “battle”.

Bear in mind also, that by its nature, a movement in the overall index reflects the sentiment towards the shares that comprise it If you accept that this is an approach that you wish to employ in your trading, then logically you should only consider a “long trade” when the overall market is in uptrend and short trades when in downtrend. Additionally, it is generally accepted that a close in the top third of a candle is more likely to see follow through than if towards the bottom of the candle. 2. US trend and futures direction and degree of potential movement (Daily chart US500) If one subscribes to the idea that the ASX will commonly reflect the performance of US markets, then there are already “clues” as to what may happen through looking at the US futures.

Although these can and usually do change as more information is released, again logically, you need to ask the question as to whether trading against what the futures are telling you could happen is worth integrating into your trading plan. For example, this could look like “If I am looking at a long trade on the ASX, I will position size half of the level which I would normally do, if US futures are down in excess of 0.3%”. 3. The VIX index trend The VIX index (sometimes termed the “fear index”) reflects implied volatility of options (so is forward looking).

It is commonly recognised that there is an inverse relationship between movement in the VIX and the S&P500. Hence, a movement up in the VIX could be interpreted as an indication the market is getting “anxious” and so there may be a sell off (and visa versa ). Some have also suggested that on some occasions you may see a movement in the VIX prior to the market move.

Whether this is the case or not in reality is up to your judgement. Again, you need to make a choice as to whether to integrate this into your risk assessment of the market as a whole and articulate in your trading plan accordingly. 4. Economic data As with other trading instruments you will already be familiar with the fact that short term market sentiment may change with the new information, or expectations, from major economic data.

Remember equity markets may respond differently in terms of both relevance and volatility to other instruments e.g., a perceived increased likelihood of an interest rate cut for example following a stronger than expected employment report will be bullish for equity markets but negative for the relevant currency. Also, there may be economic data normally of low impact to Forex but may impact on specific sector shares significantly e.g. New home sales figures may create little disturbance to currencies in comparison to other data points but may have a significant impact on home building companies. 5.

Specific sector information An obvious example of this would be that every Wednesday morning in the US the EIA release oil inventory figures showing either a draw-down or increase in supply. If this moves from that which was expected, then there may be a noticeable move in oil price. So, logically it makes sense to exercise more caution if considering an energy stock CFD on a Wednesday in trading on the ASX.

In summary… As is the case always, effective risk management is a critical cornerstone to achieving positive trading outcomes. Risk management interventions may be either to consider whether not only to enter a position (or exit an open one), but also the size of the position you choose to enter. Although, we are not aiming to be prescriptive, after all it is you who make the choices in ALL your trading decisions.

We have discussed some things for your consideration in managing the “gap” with share CFDs. It is now over to you, to make decisions as to what is right for you, and of course to articulate this within your own trading plan. Please drop an email with any questions or comments related to the session to [email protected] Mike Smith Educator GO Markets Disclaimer The article from GO Markets analysts is based on their independent analysis.

Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs. Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

Gold had been on a steady rally to the upside with the price climbing along the bullish trendline from the 1620 price level in November 2022 to reach a high of 1960 in February 2023. This move higher was driven by general market anticipation that the US Federal Reserve would pivot on its current monetary policy, slowing down or pausing future interest rate hikes sooner than expected. Fundamental Overview Last week, the US Federal Reserve, European Central Bank, and Bank of England increased their respective interest rates by 50bps.

With the central banks continuing to hike rates, and real yields rising again, gold could be viewed as a less attractive investment option. On Friday, the US non-farm employment change data was released stronger than expected at 517k (Forecast: 193k) and the US unemployment rate fell to 3.4%. This led to a significant recovery in strength for the DXY, with the price climbing to the 103 price area.

Technical Overview As the DXY strengthened, the negatively correlated Gold saw a sharp pullback, with the price trading down to the 1864.61 price level. The retracement in Gold saw it break through several key technical bullish elements, in particular, the bullish trendline from November, the 1900 round number support level, and the first Fibonacci retracement level of 23.6%, leading to the near-term technical outlook for Gold to shift from bullish to be short-term bearish. A deeper correction to the downside can be expected, as the Relative Strength Index (RSI) reversed strongly from the overbought region and through the 50.0 level.

However, the downside momentum could find support between the price range of 1800 and 1740 price range, formed by the 50% and 61.80% Fibonacci retracement levels respectively. Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets.

Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

Market sentiment towards a currency pair, and hence price, changes when new information comes into the market. The most common situation that creates such a change is the release of economic data. These are planned in terms of timing to theoretically offer no market participant an advantage over another market participant.

Economic data revised For those of you who are less experienced traders it is worth pointing out three important points: a. Some economic data releases have the potential to make a greater impact on market sentiment than others. It is beyond the scope of this article to explore this in detail, however major data points include for example GDP, jobs data, CPI (inflation measure), and interest rate decisions. b.

It is not the number per se but rather the comparison against what is expected. There is a market consensus “baked into the price” already, a projection in other words, as to what is likely to happen to major data points. So, it is the closeness or otherwise to this expected figure that is the key factor.

A big miss in either direction is likely to have a far more significant impact on market sentiment than a figure that is at, or close to, expectations. c. Also, the importance of a data point is to some degree relative to the timeframe you are trading. For example, in a shorter-term position where you position higher but are aiming for a smaller Pip move to take profit, economic data is more important, than perhaps when trading a daily chart.

As a Forex trader, you have one key fact in your favour is that the time of these announcements is entirely predictable. What this means to you is that you can make a choice and “programme” into your trading plan potential action(s) when faced with the prospect of significant imminent data release. Your trading choices Assuming you already have a defined exit general strategy in place for open positions that includes having a trailing “stop” should a trade move in your desired direction, you have THREE potential choices to make.

Accepted good general trading practice would be that you “plant your flag” in one of these as your standard. Once you have planned and implanted this, then you can prospectively test the other two, to determine which is the optimum individual “fit” for you as a trader. Your three choices are: A.

To close any open positions that are likely to be impacted by the data release to remove the risk of loss from your existing dollar result in the position. Although reducing downside risk you are also risking losing fast upside potential, should price move quickly in the direction of your trade. B.

To do nothing new i.e. adhere to your normal trail stop strategy. In this case you have retained the opportunity of upside potential whilst increasing the dollar risk associated with your wider stop (compared to the next option) being triggered. It is worth bearing in mind with this, and the subsequent choice we will discuss, there is always chance of some slippage i.e. not been filled at expected order price.

The risk of this is that it’s highest with the often-higher volatility situation following data release. C. To tighten your normal approach to trailing a stop e.g., if your norm is to trail your stop to within 20 Pips you could choose to tighten to within 10 Pips of current price pre data release as part of your system.

What this means to you is that if a trend does reverse and trigger your stop it will be at a better level, whilst still giving you any upside potential. What these all mean to you: A. Articulate within your trading plan what is your primary approach and clear any unambiguous situations where you may vary this.

B. As stated before, choose to trade the approach that you prefer right now, and then compare potential results against the other two.

Before we start, this is one of those “tell-it-how-it-is” articles, so perhaps turn your sensitivity meter down a little and read this in the nurturing, supportive spirit in which it was written. It does involve some work for those who are serious about growing as a trader, so be warned it lays down a challenge to act. The bottom line is that you may have done the ‘technical’ learning, have the optimum trading plan on the planet, but many traders do NOT get the results that may be possible due to their level of trading discipline.

If one has planned an effective exit strategy, and position sizes appropriately, accepting that some trades will go against you, rarely do the major account draw-downs happen that many, many traders sustain unless you stray from your system. More commonly, and arguably almost invariably, major draw-downs are a result of ineffective systems (and if you have not got a trading plan in place, get one!) or poor discipline in execution. The reality is that one bad trade where discipline is noticeably absent can remove weeks or even months of positive results.

But there is another “trading beast” at play here, even if one doesn’t have the major draw-down in one or two trades, there is the insidious impact of regular “smaller” discipline issues that can nibble away at your account value over a period of time. It is the latter that is the focus of this article. Why this “counting the cost” approach?

The educational aim for this article, is to stimulate some evidence gathering that may indicate that something NEEDS to change in your trading. If we look to the academic work if what motivates changes, there is a principle of interest that could be relevant. Firstly, if we look to Motivational Hedonistic theory, this suggests that people (and that includes traders) are motivated to change by either pleasure (in this context positive trading results) or avoiding pain (or negative trading results).

The reality is, as stated previously, that many traders have this insidious reduction of account value, or as an alternative “bumble along” finding themselves in a small gain following by small loss cycle and never seem to move forward. This ‘middle ground’ neither causing the two extremes of trading pleasure or pain, may result in a complacency and fail to provide the motivation to take real and meaningful action to change results. In this case, a logical approach would be to do some work that produces the evidence and jolts the trader out of this minimal action state.

This is what the following exercise aims to do or in other words, we are going to try to create some pleasure or pain to be your motivator to take any action you need to. The idea is, if we can mirror those trades that followed what we planned to do (and take pleasure from that), and removed the execution errors (and so the pain created by that evidence), then we have the platform to change positively. 3 steps to create the trading motivation to change What you need before you start Ring-fence some time (after all your trading future could depend on it!) A critical mass of your latest trades to review (we suggest a minimum of twenty) Your trading platform to historically look at charts and the honesty to record “what happened”. Your bottom-line result on our account as a benchmark of what really happened.

Step 1 – Dividing your trades. Objectively look at the trades you have taken. Make two columns, dividing these into those which you adhered to plan (“1”) and those which you did not (“2”).

Remember, exits and position sizing are the key things to include, not only those when you let a loss run but also those where you cut a potential profit short in a trade in your “2” column ( not including pre-planned profit targets). Remember also to take a loss that did adhere to plan goes in column 1. Step 2 – Analysis stage 1 – The trading pain/pleasure overview Let’s start with some simple analysis.

Total the results from each column and make a judgement of what these totals mean on where your account could have been, your execution discipline and the level of pain or pleasure you feel when you look at each column. Step 3 – “Turning the screw” – Analysis stage 2 At a deeper level we can start to look at what would have happened in those trades in column 2, ONLY if you had executed as you should. Look back at those charts specifically and dependent on what you failed to execute, record what would have happened if you had positioned sizes appropriately, had a system stop in place (or not moved your original stop when you shouldn’t have), and if you hadn’t pressed the exit button too early when you should have adhered to your trail stop strategy fully.

In recording the difference of potential versus the reality, there may be the level of pain to create that “MUST DO” feeling to take appropriate and meaningful action going forward. To summarise, often we need to “ram home” what is happening in our trading to take the action to grow as a trader and increase the likelihood of improving results. Doing the suggested practical exercise may give you the impetus to not only stick to plan, but also consequently gain the opportunity to start objectively looking at how to improve that plan to better fit you as an individual trader.

And finally One final thought, many traders come into trading with the desire to do this for a lifetime. The risk therefore of NOT addressing this, is that you not only lose a large proportion of the original capital you put into the market, but ultimately for many traders, but because there has been inaction in putting right things you need to, their pain may lead them to remove themselves from the market and destroy the potential that a lifetime of trading could create. Mike Smith Educator GO Markets Disclaimer The article from GO Markets analysts is based on their independent analysis.

Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs. Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.