There have been many articles written about picking targets, even some from us. Today we will offer more detailed options for those that want to experiment with other means for deciding on targets.
We know that we can use price areas of support or resistance as a way technical traders can plan for targets but how can we even know if the price will ever get there. If our expectation is for it to get there in a few days or even by the end of the day, how can we know if our target is too big or not?
One way you can decipher the probabilities of getting to a target within a time frame is to use average true range tools. These are studies you can add to your charts on the time frame you are working with and it will give you a reading as to the range you may expect. If you are shooting for a target that is $1 away but the stock has an average range for that period of only $0.25 then you know you are shooting for a target that is not likely to happen anytime soon. Day traders really love this as a tool to know if the stock they are considering trading is an active one or not. With little previous knowledge we can say that Apple is a stock that can move $1 with little effort, but what about Cisco? That stock may move $.25 in an entire day so having a tool to quickly tell you the range will help you in your target selection.
Overall market volatility can also be a tool you may consider. If the overall market volatility is greater on a particular day or string of days then you may be willing to hold for a larger target. Whatever has caused more market movement may mean that your stock could be having larger than normal price swings. To limit yourself to a smaller target in these cases may mean leaving money on the table.