Various criteria go into determining the price target levels such as the projected measured move of the technical pattern, support & resistance levels, Fibonacci retracements, volume-at-price clusters, etc… Profits targets are also largely determined based on my experience with such factors as the past trading history of a stock or sector as well as taking current market conditions into consideration (e.g.- Is market volatility high or low at the time? Is the trade aligned with the current trend or only a quick, counter-trend trade?)

Price targets are typically set just below the level where a reaction (i.e.- a pullback and/or brief consolidation period) is likely upon the initial tag of that level. Price targets (T1, T2, etc…) are set slightly below the actual resistance level for longs (slightly above for shorts) to help minimize the chances of missing a fill, should the position reverse just shy of support/resistance. For example, if the charts indicate that a long trade idea is likely to hit the $50.00 resistance level before reversing, my price target (and sell limit order) might be placed at 49.96. Also taken into consideration is the fact that when you sell a stock, your order is usually filled at the bid price, which is below the ask price (at which buy orders are filled). As such, if the HOD for the stock in the example above was exactly 50.00, that would most likely indicate that the only orders filled at that price were buyers, with sellers of the stock being filled at 49.99 or below as even the most liquid stocks will typically have at least a 1 cent spread (i.e.- the difference between the bid & ask price).

also see: Why Do Some Trades List Multiple Price Targets?

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