Take Profit
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Join →What Is Take Profit?
A take-profit order is an instruction designed to close a position when price reaches a specified target level. It can help us define an exit condition in advance instead of relying entirely on a decision made during the trade.
Target and Trade Structure
A take-profit level should be connected to the trade’s expected price structure, strategy rules, and risk-reward framework. It should not be treated as a universal rule that every trade must use the same percentage target.
Example
If we buy at 100 and our predefined strategy target is 110, a take-profit order can be placed around 110. If price reaches the level, the order can close the position according to the execution rules of the venue.
A take-profit order can also be combined with partial exits or a trailing approach, depending on the strategy. These methods will be developed later.
Key Terms
Take profit, target, exit, risk-reward, partial exit, trailing.
Knowledge Check
- What does a take-profit order do?
- What should a target be connected to?
- Why should we avoid treating one fixed percentage target as universally appropriate?
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