Profit Target

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.

RELATED TERMS
  1. Entry Point

    The price at which an investor buys an investment. The entry ...
  2. Profit

    A financial benefit that is realized when the amount of revenue ...
  3. Business Exit Strategy

    An entrepreneur's strategic plan to sell his or her investment ...
  4. Trading Strategy

    A set of objective rules designating the conditions that must ...
  5. Barriers To Exit

    Obstacles or impediments that prevent a company from exiting ...
  6. Price Target

    1. A projected price level as stated by an investment analyst ...
Related Articles
  1. Trading

    Must-Know Simple & Effective Exit Trading Strategies

    An effective exit strategy builds confidence, trade management skills and profitability.
  2. Trading

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.
  3. Trading

    Effective Risk Control With Scaling Trading Strategies

    Scaling strategies allow for greater risk control than simple entries or exits, letting traders seek the most advantageous prices available.
  4. Trading

    A Look At Exit Strategies

    Setting appropriate exit points should help you avoid taking premature profits or running losses.
  5. Trading

    Only Take a Trade If It Passes This 5-Step Test

    Not every moment is a good trading opportunity. Put each trade through this five-step test, so you're trading only at the best profit potential times.
  6. Trading

    Increase Your Profits With Soft Or Mental Stops

    A soft stop provides a trader with added flexibility, allowing him to react to ongoing changes in the market.
  7. Trading

    The Elements of a Perfect Momentum Trade

    Five technical elements build profits in high-risk momentum trading strategies.
  8. Trading

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  9. Trading

    The Anatomy Of Trading Breakouts

    We'll walk you through this trading strategy from start to finish.
  10. Trading

    How To Start Trading: Trading Plan Development

    A trading plan should including rules about how and when to place trades that includes: the markets to be traded, primary chart intervals, indicators and settings, rules for position sizing, ...
RELATED FAQS
  1. What is the formula for calculating profit margins?

    Learn about gross, operating and net profit margins, how each is calculated and how they are used by businesses and investors ... Read Answer >>
  2. How can an investor profit from a fall in the utilities sector?

    Learn how an investor can profit from a fall in the utilities sector by employing speculation methods such as short selling ... Read Answer >>
  3. Should I look at a company's operating profit or net profit?

    Explore the ways in which investors and market analysts use a company's operating profit and net profit margins for equity ... Read Answer >>
  4. How do I build a profitable strategy when spotting a Hammer pattern?

    Understand how analysts use the hammer candlestick pattern to establish trading strategy to enter and exit the trade and ... Read Answer >>
  5. Are stop orders only used for stocks?

    Learn about sell-stop and buy-stop orders, when and how to use stop orders and what other securities stop orders could be ... Read Answer >>
  6. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center