The projected price level of a stock as stated by an analyst or trader, representing the exit point of a profitable trade.
A target price is the projected future price level of a stock or financial instrument. In active trading, it represents the exit point where a trader plans to sell their position to lock in profits.
Traders and research analysts estimate target prices based on technical chart patterns (like measured moves of breakouts), historical resistance levels, or fundamental valuations (like discounted cash flows or forward earnings multiples). Once the price hits the target, a profit-taking order is triggered.
Trading without a target price is like sailing without a destination. A defined target price allows you to calculate your Risk-to-Reward ratio (e.g., risking ₹10 to make ₹30) before entering a trade. It prevents greed from keeping you in a trade too long, ensuring you book profits before the market reverses.
You buy Reliance at ₹2,500. Based on previous chart peaks, you identify a major resistance level at ₹2,600 and set it as your target price. Simultaneously, you set a stop loss at ₹2,450. Your risk is ₹50 and reward target is ₹100, representing a healthy 1:2 risk-to-reward ratio.
You can exit completely, book partial profits (e.g., sell 50% of your shares), or use a trailing stop loss to lock in profits while letting the remaining position run if the trend is exceptionally strong.
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A style of trading where securities are bought and sold within the same trading day to capture short-term price movements.
An investing style where bought stocks are held for more than a day, transferred into a demat account for long-term hold.