price targets are destroying your returns

If you're still setting arbitrary price targets and take profits based on some ‘expert’ recommendation or round numbers, you’re sabotaging your own success.

Price targets are financial astrology dressed up as analysis, and they’re costing you serious money.

Here’s the truth…

Analyst price targets have a 39% mean absolute error and only predict the correct direction 54% of the time. You’d get better results flipping a coin.

Good traders making real money have figured out something most miss…

Let the market tell you when to exit, don’t guess.

Price Targets Are Expensive Fantasy

Every trading guru loves showing neat little price targets—buy at £50, sell at £60. Simple, right? Complete bollocks.

Research across multiple markets shows analyst forecasts miss by 24.8% on average. These aren’t rounding errors—they’re fundamental flaws in trying to predict where price “should” go.

But the real salt in the wound is that price targets make you miss out on the biggest moves. You exit early when trends really take off. Tesla rockets from $50 to $400? Your target probably had you out at $75, watching the rest unfold without you. And then you get back in and have a complete feeling of FOMO and anxiety. You fucked up another trade…

The Volatility Revolution: Why ATR Actually Works

Forget guessing. Focus on what’s happening now. That’s where Average True Range (ATR) position sizing changes everything.

ATR measures real market volatility, not some analyst’s old projection. It adapts in real time. When markets get choppy, ATR widens your stops. When they calm, it tightens them. It’s responsive, not predictive.

Volatility-based position sizing just makes sense. You adjust risk to current market conditions instead of pretending each trade deserves the same treatment. It’s like wearing a weather-appropriate jacket instead of always wearing shorts because you like summer.

The Maths That Makes You Money

Here’s how serious traders size positions. They risk a fixed percentage per trade—usually 1–2%—then use ATR to set stops and calculate size.

Position Size = (Account Risk)/(Stop Loss Distance)

Say you’ll risk 1% of £100,000 (£1,000) and ATR shows 2% volatility. You place your stop at 2× ATR. Position size becomes £1,000 divided by that stop distance. Simple maths, but it actually reflects market reality and is easy to do… and repeatable across your entire process.

Comparisons of sizing methods show volatility targeting smooths risk and returns. Fixed price targets? They ignore what the market is doing right now.

Why Fixed Take Profits Always Fail

Fixed take profits share three fatal flaws:

Rigid: Markets don’t care about your target. A stock hitting resistance at £95 when your target was £100 simply moves based on buyers and sellers, not your spreadsheet.

Missed Opportunities: Fixed take profits cut winners short. When momentum builds and a stock breaks through resistance, you’re already out, watching the rest of the move from the sidelines.

Blind to Conditions: Price targets treat every situation the same. A stock in a strong uptrend deserves different treatment than one chopping sideways. But your £100 target doesn’t know the difference.

You’re betting against the market continuing its trend. Trends often extend far beyond any arbitrary point.

ATR-Based Exits: The Professional Method

Professionals use volatility, not crystal balls, to manage exits…

Initial Stop: Place your stop at 2–3× ATR from entry, depending on your timeframe and noise tolerance.

Trailing Stops: As the trade moves in your favour, trail your stop using ATR multiples.

In the Academy (which I really think you should book a call with me to discuss, we use a combination of this and moving averages to determine how you crystalise your profits.

This locks in gains while letting trends breathe. When volatility spikes, your stop moves further away. When it calms, it tightens. But systemised methods like this remove all guess work of trading and investing. Turn your brain off.

Dynamic Response: Unlike fixed targets, ATR adjusts to evolving market conditions. Tight volatility means close stops initially. Strong trends raising volatility give your trade room to run.

It’s like having a risk thermostat that adapts to market temperature.

The Numbers Don’t Lie: Volatility Wins

Trend-following research shows volatility-based sizing dramatically improves returns and risk control. You work with what’s happening, not against it and stop fannying around with that dreading FOMO or anxiety that you’re not following an objective process.

Studies on sizing methods highlight fixed sizing’s random risk levels. In high volatility you’re overexposed. In low volatility you barely get in. Volatility sizing normalises it all.

Dress for the weather instead of ignoring it. And it’s pissing it down in London right now.

How to Actually Implement This

1. Decide your risk per trade (1-10% of equity).

2. Calculate x-period ATR for your timeframe (could be 7 day, could be 30 day, could be 50 day)

3. Set your stop at 2–3× ATR from entry.

4. Compute Position Size = Account Risk/Stop Distance.

5. Trail stops using ATR multiples as the trade develops.

It’s objective. No guessing, no praying your target hits, no hope nonsense. You just respond to real volatility.

When Markets Go Wild: Automatic Protection

High-volatility periods require smaller positions. ATR does it automatically. When markets get choppy, stops widen and sizes shrink.

When calm returns, you size up again.

It’s the opposite of panicking. ATR keeps you consistently positioned, regardless of the chaos.

Let the Trend Tell You When to Exit

The key insight: let market behaviour, not arbitrary targets, determine exits.

ATR trailing stops adapt to volatility patterns.

Strong trends often tighten volatility over time, naturally moving stops closer.

Choppy markets maintain higher volatility and wider stops, preventing premature exits.

You’re not predicting trend endings. You’re letting volatility signal them then taking action. Why do you think all these funded trader programmes don’t let people trade news?

It’s about protecting the balance of the firm. When vol increases, the firm is effectively decreasing their risk.

The Compound Effect Gets Massive

Better exits compound in ways you notice only after weeks and months. Volatility-based risk management provides consistent performance across market regimes.

Stop leaving money on the table and avoid unnecessary losses. The cumulative effect over dozens of trades becomes enormous.

Stop Fighting Reality

Price targets fight market reality. They assume you know better than millions of participants where price should go. That’s not trading. That’s fortune telling - and expensive.

Volatility-based methods work with market conditions. They respond to real data, not opinions.

Your account balance doesn’t care about your targets. It cares about going up and to the right - or at least you should. Start managing positions based on volatility, not beliefs and vibes.

That’s the difference between speculation and professional trading.

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