Another one of the complexities of being a trader is trying to determine a target price for your trades. A target price is simply how high (or low in the case of a short trade) do you think the security will go from your purchase price. It is very important to try to determine a target price because without it you are basically trading blind. An example would be, would you get in your car to drive to work without knowing where your office was located? Of course not. So how could you place a trade without at least having an idea of what your potential profit would be.
Also, you cannot limit your risk by managing your Reward vs. Risk Ratio without knowing your target price. Another reason for calculating a price target is that it allows you to determine whether or not you are placing a trade at a reasonable price. What do I mean by that? If a stock has moved from $10 to $30 in the past year and based on your analysis the target price is $35, yet support is at $20, you would be risking to much to enter this trade at $30. You would be better off waiting to see if the stock dropped back to the $25 area as this would be a more reasonable entry point.