During the same period,Ralph Nelson Elliott, with his Elliott Wave Theory, introduced a structured tool for price prediction and target setting based on Fibonacci ratios. Then, in the 1940s,Edwards and Magee, in their famous book Technical Analysis of Stock Trends, systematically explained targeting based on chart patterns such as head and shoulders, triangles, and double tops, making it an inseparable part of technical analysis.
In fundamental analysis, targeting, especially from the second half of the 20th century, was employed by financial analysts and investment banks through models such as Discounted Cash Flow (DCF)to estimate the intrinsic value of companies and set price targets for buying or selling stocks.
Therefore, targeting is not an invention but the result of several decades of effort and progress in various financial analysis fields, which has evolved over time into a scientific and structured approach.
The Importance of Targeting in Cryptocurrency Trading
There are many key factors that highlight the importance of setting targets, or price determination, in cryptocurrency trading, which are influenced by two key elements in the crypto market. The first factor is the high sensitivity of the cryptocurrency market, and the second factor is the widespread presence of non professional traders in large volumes. In the following, we will examine the reasons behind the importance of these factors:
Severe and Unpredictable Volatility in the Crypto Market
The cryptocurrency market is inherently volatile and unpredictable, which leads to growth or declines of several tens of percentage points in just a few hours or even minutes.
If a trader does not have a predetermined price target, they may stay in a trade hoping for more profit when the price reaches a profitable level. As a result, when the market suddenly reverses, they may not only lose the profit but also incur a loss. Setting specific targets (both for profit and loss) means having a trading plan that helps the trader act more precisely in this fast paced market.
Large Volume of Traders
A large portion of crypto market participants consists of beginners, inexperienced individuals, or those with limited financial knowledge, who are often driven more by emotions than by logical analysis in the market. This leads to concepts such as Fear of Missing Out (FOMO) and Fear, Uncertainty, and Doubt (FUD). These concepts generally result in emotional, unanalytical trading, causing much more volatility than market predictions suggest.
Lack of Regulatory Structures and Unforeseen External Risks
Unlike traditional financial markets, the cryptocurrency market has not yet been fully regulated by reputable financial institutions. This lack of regulation creates significant space for price manipulation, misleading advertisements, worthless projects (such as shitcoins), and volatility caused by whale behavior (large investors).
In such a market, where changes can happen suddenly and without warning, having clear trading targets acts like installing a bumper on a car, protecting an individual's capital from unexpected damages. By setting profit and loss targets in advance, the trader is prepared for critical situations and does not have to make pressured decisions in the moment.
Therefore, we can conclude that while the cryptocurrency market can be highly profitable, it is considered one of the riskiest financial markets due to its volatile structure, the presence of immature traders, lack of fundamental information, and absence of organized regulation. In such an environment, targeting is not only a useful trading technique but a necessity for capital management, emotional control, and long term survival. A trader who enters the market without a clear target will easily lose their way in this turbulent space.
Principles and Suggested Methods for Targeting in the Cryptocurrency Market
One of the important skills that every trader should master is the method of setting targets. As mentioned earlier, targeting refers to determining the points at which we plan to exit a trade and identify our profit and loss levels. However, it’s important to note that simply setting one price target is not enough. We must also follow certain principles and methods that can help us with targeting. Some of these principles and methods include the following:
Using Partial Targeting (Step by Step Targeting)
One of the best methods for managing profit in the cryptocurrency market is using partial targets or tiered selling. In this method, instead of setting a single target and closing the entire position at that level, you set multiple price targets for step by step exits. For example, at the first target with a 10% profit, you might sell half of your position, at the second target with a 20% profit, you might sell another 30%, and at the third target with a 30% profit, you either close the entire trade or manage the remaining position with a trailing stop loss. This strategy ensures that even if the price reverses before reaching the final target, part of your profit is already secured. This method is particularly useful and efficient in volatile markets such as cryptocurrencies.
Targeting Using Fibonacci Extension
The Fibonacci Extension tool is one of the powerful and widely used tools in technical analysis for determining price targets in the cryptocurrency market. This tool uses mathematical ratios like 1.618 or 2.618 to identify potential price reaction points. Many professional traders use Fibonacci levels as precise targets for exiting trades because these levels often act as potential support or resistance. When a resistance level is broken, Fibonacci Extension helps you predict the next target based on past market behavior.
Targeting with Volume Analysis
Another professional method for setting targets in the cryptocurrency market is volume analysis. Analyzing volume alongside price can provide important clues about market entry and exit points. Generally, if there is a sudden increase or decrease in trading volume near a specific price level, that level could be considered a suitable target for exit. This is because large market participants, such as financial institutions or whales, often execute significant buy or sell orders at these levels. Therefore, identifying these points through volume analysis helps you recognize the right time to secure profits and avoid premature market direction changes.
Targeting Based on Market Structure
One of the most advanced and effective targeting methods globally is the use of market structure. Unlike strategies that rely solely on tools or mathematical numbers, this method focuses on the actual price behavior and its reaction to key levels from past market movements. In this approach, the trader carefully examines highs, lows, consolidation zones, breakouts, and pullbacks to identify levels where the price is likely to react. These areas are considered smart targets for exciting trades.
For example, if the price previously stalled or reversed within a specific range, the likelihood of a reaction at that level is very high. In this method, the trader is always looking for points where the market previously established equilibrium or imbalance and uses these as targets.
The key advantage of this method is that, instead of relying solely on tools, it is based on the analysis of actual buyer and seller behavior. This has made many professional and institutional traders base their targeting on market structure rather than just indicators or Fibonacci ratios.
| Targeting Method | Short Explanation | When to Use | Key Advantage | Important Note |
|---|---|---|---|---|
| Partial Targeting | Dividing the trade into parts and exiting step by step | Volatile or high risk markets | Securing profit in case of market reversal | Requires careful volume management and emotion control |
| Fibonacci Extension | Using mathematical ratios to predict target levels | After breaking resistance or support | High accuracy in predicting distant targets | Must be drawn exactly in a valid area |
| Volume Analysis | Analyzing volume fluctuations at key price levels | As price approaches the target | Identifying whale entry/exit and key market points | Misinterpreting volume can lead to incorrect analysis |
| Market Structure Targeting | Setting targets based on past highs, lows, and market reactions | All timeframes, especially mid term and long term | Aligns with actual market behavior and main market participants' mindset | Requires experience in price action analysis and understanding price structures |
Summary
Target setting in crypto is a crucial skill for survival and profitability. In a market that can reverse direction within minutes due to extreme volatility, the large presence of emotional traders, and a lack of proper regulation, having predefined take-profit and stop-loss levels acts like a roadmap it prevents impulsive decisions and protects your realized gains.
The best approach is to combine different methods: partial exits to lock in profits, Fibonacci extensions for precise targets, volume analysis to identify key levels, and market structure targeting to align with actual price behavior. This is where the real difference between professional and novice traders lies: professionals know exactly where and why to exit. By practicing consistent target setting, you too can manage risk effectively and pave the way for sustainable growth.
Frequently Asked Questions
1.Why is target setting essential in crypto trading?Because the crypto market is highly volatile and unpredictable, having predefined take-profit and stop-loss levels helps you avoid emotional decisions and protect your profits.2. What is the best method for setting targets?The most effective approach is combining several methods such as partial exits, Fibonacci extensions, volume analysis, and market structure targeting to achieve more accurate targets.3.Is target setting only used for exiting trades?No, target setting is not just for exit points — it’s also crucial for capital management, emotion control, and reducing overall trading risk.