Targets are the prices at which part of a trade (i.e. some contracts, shares, or forex lots) or all of a trade (i.e. all of the contracts, shares, or forex lots) will be exited. There are two types of targets (note types of targets not types of target orders) that can be used to exit a trade, namely fixed targets and running targets.
Fixed Targets
Most targets are fixed targets, meaning that their orders are placed at a specific price, and the price is not usually changed during the trade. For example, a long trade on the EUR futures market at 1.1100 might have a fixed target at 1.1200, which would be active (i.e. waiting to be filled) from the trade's entry until the target was reached. Fixed targets can also be based upon alternative criteria such as a candlestick pattern or an indicator pattern, instead of a specific price.
Running Targets
Running targets are targets that do not have a specific price (or a candlestick or indicator pattern) at which they will be reached. Running targets are designed to keep a trade active in case the market continues moving in the direction of the trade. For example, a short trade on the EUR futures market at 1.2200 might have a final fixed target at 1.2100, but have a running target in case the market continues moving downwards (e.g. 1.2000, 1.1950, etc.).
Using Fixed and Running Targets
Fixed targets that are based upon a specific price are usually decided in advance of a trade (i.e. before the trade is entered), and they are not usually modified during the trade. For example, if a target is placed at 1.1500, then the target will be reached at 1.1500. Fixed targets that are based upon a candlestick pattern or an indicator pattern are also usually decided in advance of a trade, and while the reason for the target (i.e. the candlestick or indicator pattern) is not usually modified, the price at which the target is reached is not known until the target is reached (i.e. the candlestick or indicator pattern occurs).
Running targets cannot be decided in advance of a trade, because they do not have either a price or a candlestick or indicator pattern at which they will be reached, and this is what makes running targets very difficult to use. The only criteria that will cause a running target ro be reached is "enough profit", and "enough profit" is a subjective criteria, and therefore easily affected by psychology and emotions (especially fear and greed).
For example, a long trade on the EUR futures market at 1.1400 might have a final fixed target at 1.1500, and a running target designed to make some additional profit if the market continues moving upwards above 1.1500, but how much additional profit is enough (e.g. 1.1550, 1.1600, or 1.2000)? If the running target is designed to make one hundred ticks (0.0001 being one tick) of additional profit, then the running target would be reached at 1.1600, but this is then a fixed target at 1.1600, and no longer a running target, and it is possible that the market will continue upwards to 1.1800 (i.e. three hundred ticks of additional profit). If the running target is designed to make five hundred ticks of additional profit, then the running target would be reached at 1.2000, but this is then a fixed target at 1.2000, and no longer a running target, and it is possible that the market will only move upwards to 1.1900 (i.e. the so called running target will not be reached).
In other words, the only possible criteria for a running target being reached are emotional criteria, and emotional criteria are the worst possible reasons for making any trading decision. For example, if the long trade on the EUR futures market mentioned above moved four hundred ticks past the final fixed target, then the trader would experience two opposite emotions, namely fear and greed. The fear says that they might miss out on the five hundred ticks of additional profit and they should therefore exit the trade immediately, but the greed says that they might miss out on another three hundred ticks of additional profit (i.e. a total of eight hundred ticks of additional profit), so they should keep the trade active. The decision that the trader is trying to make is not a rational decision, but an emotional reaction based upon two equally powerful but conflicting emotions, and either reaction (exiting the trade or not exiting the trade) is likely to be a mistake.
Professional Traders and Running Targets
Professional traders (the ones making all the money) do not use running targets. Professional traders always use fixed targets, and they always know at which prices they will place their fixed targets before they enter their trades. Professional traders might adjust their fixed targets during a trade, but there is always a valid trading reason why a target is being modified, and never an emotional reason such as not wanting to miss out on some additional profit.
