Take-Profit Orders: Your Exit Plan
Know where you're getting out before you get in.
Researched and written by Laurent Exit Before Greed Takes Over
A take-profit (TP) is the mirror image of a stop-loss. Instead of closing at a loss level, it closes your trade automatically when your profit target is hit.
Why not just watch the trade and close it manually when you're happy with the profit? Because of greed. Here's what actually happens:
A take-profit removes this entirely. You set your target at +40 pips based on your analysis. Price hits 40, trade closes, profit locked. You don't need to be at the screen. You don't need to fight greed.
Stop-Loss + Take-Profit = A Complete Trade
Every trade should have both an SL and a TP set before you enter:
With this setup, three outcomes are possible:
- TP hit: +60 pips ($60 on mini lot). Trade closes in profit.
- SL hit: -30 pips ($30 on mini lot). Trade closes at a managed loss.
- Manual close: You decide to exit before either is reached.
Notice the risk-reward ratio is 1:2. This means you risk $30 to potentially make $60. If you get this right even 40% of the time, you're profitable. We'll explore this math deeply in Level 7 (The Strategist).
Key Takeaways
- • A take-profit automatically closes your trade when your target is reached.
- • Setting a TP before entering prevents greed from ruining good trades.
- • Your TP should be based on analysis (support/resistance, risk-reward), not wishful thinking.
- • Without a plan to exit winners, you'll hold too long and watch profits disappear.