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Top 2022 Trading Lesson: Treat targets as a guide, not as a rule.

Top 2022 Trading Lesson: Treat targets as a guide, not as a rule.

Manish Jaradi, Strategist
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‘Trade Market Behavior. Not Forecasts.” -- Robert C Miner.

“How much upside (or downside)?”; “What’s the target?”; “What is the potential return?” These are some of the questions that come first to mind when assessing a trading opportunity. Very valid questions, but often given more weight than others, with the result being we either tend to miss trading opportunities or exit a trade prematurely. USD/JPY was a classic example at the start of 2022 – these questions would have resulted in missing the trend completely or settling for something smaller than what the market was prepared to offer.

I try to remind myself to pose the following questions before progressing to reward: “What is the trend in my timeframe of reference?”; “What are the drivers (i.e. my process of trend determination and trade signals)?”, followed by “What is the risk (how much downside), and whether the risk is acceptable?”. The process and risk are something that we can control, but the reward is determined by the market. A pre-determined reward or a target/forecast – underestimated or overestimated -- can lead to disappointment, and loss of confidence, eventually undermining the process.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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