Take profit
Also known as: take-profit order, TP
Take profit: A take profit is an order that closes a position automatically when the price reaches a set profit target.
How a take profit works
For a long position the target sits above the entry price and, on most retail FX platforms, is triggered by the bid; for a short position it sits below the entry and is triggered by the ask. The trade then closes at or near the target, depending on market conditions and the broker’s execution.
Take profit and risk-to-reward
Comparing the distance to the take profit with the distance to the stop loss gives the risk-to-reward ratio of a trade — for example 25 pips of risk for a 50-pip target is 1:2.
Example
Buy EUR/USD at 1.0850 with a take profit at 1.0900: if the price reaches 1.0900, the trade closes with a 50-pip gain before costs.
Learn more
- Forex Order Types: Market, Limit, Stop and More Explained
A guide to forex order types — market, buy/sell limit, buy/sell stop, stop-limit, stop loss, take profit, trailing stop and OCO — with examples.
Related terms
- Stop loss
A stop loss is an order that closes a position automatically if the price moves against you to a set level. It is designed to limit the loss on a trade, but it does not guarantee the exit price.
- Trailing stop
A trailing stop is a stop loss that moves with the price as a trade goes in your favour. It keeps a set distance from the price and does not move back.
- Limit order
A limit order is an order to buy or sell at a set price or better. A buy limit is placed below the current price and a sell limit above it.