Take-Profit Order
A take-profit order closes a trade automatically when price reaches your profit target. It helps you lock in gains without needing to monitor the market every second.
In plain English: "If price reaches my target, take my profit and close the trade."
How Take-Profit Orders Work
A take-profit order is usually a limit order attached to your position:
- It waits in the market (or with your broker) until price reaches your level.
- When price hits your target, the order executes and closes your trade.
- Because it's limit-based, it typically aims to fill at your target price or better.
Take-profit orders are often paired with a stop loss to define the trade's risk and reward upfront.
Take-Profit on a Long vs a Short
Long position (you bought first)
- Your take-profit is typically a sell limit above the current price.
- If price rises to that level, your sell executes and locks in profit.
Short position (you sold first)
- Your take-profit is typically a buy limit below the current price.
- If price falls to that level, your buy executes and locks in profit.
Most platforms label this as Take Profit (TP). Behind the scenes, it behaves like a limit order.
Where Should You Place a Take-Profit?
There is no universal "best" take-profit level. The target should match your trading idea and time horizon. Common approaches include:
- Market structure levels: prior highs/lows, support/resistance, supply/demand zones.
- Risk-to-reward targets: e.g., 1:1, 1:2 or 1:3 relative to your stop distance.
- Measured moves: targets based on a pattern's typical projection.
- Volatility-based targets: using recent ATR/average range to set realistic profit objectives.
⚠️ Reality Check
A take-profit is not "where you want the market to go". It's where you have a realistic reason to believe the move may slow down, reverse, or where your edge typically pays out.
📊 Example: Take-Profit with Risk-to-Reward
You buy EUR/USD at 1.1000. Your stop loss is 1.0975 (25 pips risk).
- If you aim for 1:2 risk-to-reward, your target is 50 pips.
- Your take-profit would be 1.1050.
If price reaches 1.1050, the take-profit triggers and closes the trade (locking the planned reward).
This approach makes your outcome measurable: you know the risk and the target before entering.
Common Take-Profit Mistakes (and Fixes)
- Setting targets too close: small wins that don't compensate for normal losses.
Fix: use a consistent R:R framework or structure-based targets. - Setting targets too far: targets that rarely hit, causing frustration and late exits.
Fix: use volatility or realistic structure levels. - Moving the take-profit emotionally: "just a bit more" or "take it early" without rules.
Fix: decide in advance when you will adjust targets, if at all. - No stop loss but a take-profit: upside capped, downside unlimited.
Fix: always define risk first.
💼 Professional Habit
Pros treat take-profit as part of a trade plan. They don't "hope" into targets; they plan targets based on probability and structure.
Common Misconceptions
-
"Take-profit guarantees I'll exit at that price."
In most liquid markets, it often fills close to target, but during gaps or low liquidity you can still get partial fills or delayed execution. -
"A bigger take-profit is always better."
Bigger targets reduce win rate unless your strategy supports them. The goal is best long-term expectancy, not one big win. -
"I don't need a take-profit if I'm watching the chart."
Many traders miss exits due to hesitation. A take-profit is a discipline tool, even if you plan to manage the trade actively.
✅ Quick Checkpoint
Try answering before expanding the model answers.
1) What is a take-profit order designed to do?
Close a trade automatically at a pre-defined profit target.
2) How is a take-profit implemented for a long vs a short?
Long: sell limit above price. Short: buy limit below price.
3) Name two ways to set a take-profit level.
Support/resistance levels, risk-to-reward targets, measured moves, volatility-based targets.
If you can explain these points clearly, you understand both the purpose and the limitations of take-profit orders.
Frequently Asked Questions: Take-Profit Orders
Should I always use a take-profit?
Not always. Some strategies use trailing exits or discretionary management. But beginners often benefit from a predefined take-profit because it forces planning and reduces emotional exits.
Can I use multiple take-profit levels?
Yes. Many traders scale out: they take partial profit at one level and let the rest run. This requires clear rules so it doesn't become emotional.
What's the difference between take-profit and trailing stop?
Take-profit is a fixed target. A trailing stop moves with price and is designed to protect profits as the market moves in your favour.
Does take-profit work on CFDs and spread betting?
Yes, most platforms support take-profit on CFDs/spread betting, but execution depends on liquidity, broker model and how the product is priced.
Summary
A take-profit order closes your trade automatically at a target, helping you lock in planned gains and reduce emotional decision-making. It usually behaves like a limit order attached to your position.
The key skill is choosing a target that matches your strategy: structure, volatility and risk-to-reward all matter.
Next lesson: Trailing Stop