I was asked the question: What are T1, etc… levels and how are they calculated? Although I’ve discussed this in the past, as new users come into the site on a daily basis, I figure that I would share my reply for those interested on what T1, T2, etc.. means and how best to utilize the often multiple price targets listed on the trade ideas on Right Side of the Chart. My reply below:
T= target. So T1= first target, T2= second target, etc… These target levels are calculated pretty much based on my read of the charts. I take into account many factors including the magnitude and technical projection of the pattern that the stock is expected to break out of but largely these targets are just levels that I “see” or feel that the stock is likely to hit. Those levels are usually what I view to be significant support or resistance levels and a large part of where I place these price targets is based on intuition and experience. Also note that in recent months, I started listing the target levels just below the actual resistance level on longs (above on shorts) in order to help assure a fill when exiting a trade. It has been my experience that if too many eyes are watching the same level, expecting a stock to reach that level before pulling back, then the Big Boys (institutions, market makers, computerized trading programs, etc..) will often step in early, causing the stock to fall just shy of the expected target.
I often list multiple profit targets on trade ideas for various reasons: Some traders, myself included at times, prefer relatively quick trades with modest profit targets and tight stops. That is what I often refer to on the site as a “hit-n-run” trading style (get in, take quick profits, and get out to re-deploy those funds in another trade). Although I am typically a longer-term swing trader, with an average holding period measured in weeks or months and therefore, usually targeting one of the higher targets, I will often take partial profits at the earlier targets along the way in order to lock in some gains but let some of my position ride if I believe that additional gains are likely. Finally, as a full-time and active trader, at times I will micro-manage my trades around the various target levels. Basically, each target is an area of support or resistance where I think a reaction (either a pullback on longs, a bounce on shorts, or a pause/relatively brief period of consolidation) is likely. In micro-managing a trade, I might book full profits when the first target is hit, maybe even reverse my trade from a long to short position by simultaneously closing the long and shorting the stock. If successful, I have booked profits on the long, then make a quick trade on the short-side at the expected pullback and then will often re-enter on the long-side again if I believe that the stock will likely go on to take out that first target and go on to hit the next target(s). Such active trading is suited for more experienced and full-time traders who are able to watch the position and broad markets closely throughout the day. The majority of those utilizing the site will probably find these target levels most useful for setting a standing limit order to book partial or full profits at the target(s) for those trade ideas that best fits their own trading style. These targets can also be useful for determining where to raise stop-loss orders as once a target (resistance) level is taken out, it typically becomes support.
Again, as traders and investors have different trading styles, time horizons, etc.. and even my own personal trading style will change at time to adapt to current market conditions, I provide multiple targets on most of the trade ideas on RSOTC.com. One final note on those targets: Typically, the final target on a trade is the point that I believe that the risk to reward (R/R) ratio no longer warrants holding the position. In no way does that mean that I don’t believe that the trade can’t or won’t continue to go higher (or lower on shorts), only that the potential for additional gains no longer outweighs the potential for loss by a fair margin. Once a final target is hit, those funds are usually better deployed elsewhere, even if moved to cash. In addition to listing the final target before a trade is entered, I will often mention my “preferred” target as well, which might be a level below the final target but one in which I think that offers the optimal R/R on the trade at the time. As the markets are dynamic, not static, both my final and preferred targets are occasionally revised but as with all trades posted here, always in advance or real-time, never after-the-fact.