DEFINITION of 'Profit Target'

A predetermined point at which an investor will exit a trade in a profitable position. Profit targets are part of many trading strategies that technical traders use to manage risk. Before an investor enters a trade, he determines a profitable exit point at which he will sell out of the position. Traders establish profit targets to avoid letting emotion take over a trade. A profit target can be expressed as a dollar amount or as a percentage return.

BREAKING DOWN 'Profit Target'

The opposite of a profit target is a stop loss point – a price point at which an investor exits a trade that has experienced a predetermined level of loss in order to avoid losing even more. Some investors use chart patterns to determine their entries, stops and profit targets. They look for patterns, such as triangles and head and shoulders, that make it easy to identify these three points.

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