An order that automatically closes a position at a predetermined price to lock in profit. It is the profit-side counterpart to a stop-loss.
What Is a Take-Profit?
A take-profit order automatically closes your open position when the price reaches a target level in your favor. If you buy EUR/USD at 1.0850 and set a take-profit at 1.0920, the position closes automatically at 1.0920 for a 70-Pip profit. Take-profit orders are Limit Orders, so they fill at exactly the specified price or better.
Setting Take-Profit Levels
Common methods for setting take-profit levels include targeting the next key resistance or support level, using a reward-to-risk ratio (such as 2:1, where the take-profit is twice the distance of the Stop-Loss), or using measured moves from chart patterns. Some traders use multiple take-profit levels, closing part of the position at each target.
Risk-Reward and Take-Profit
The relationship between your stop-loss and take-profit defines your risk-reward ratio. A 30-pip stop-loss with a 60-pip take-profit gives a 1:2 risk-reward ratio. With this ratio, you can be profitable even if only 40% of your trades win. Our Profit/Loss Calculator helps you model different risk-reward scenarios to find what works for your strategy. See our Is Forex Trading Profitable? for more on the mathematics of trading profitability.
Related Terms
Stop-Loss
An order that automatically closes a position at a predetermined price to limit losses. The most important risk management tool in forex trading.
Risk-Reward Ratio
The relationship between how much you risk on a trade and how much you stand to gain. A 1:2 risk-reward ratio means you risk $1 to potentially make $2.
Limit Order
An order to buy below or sell above the current market price. Limit orders guarantee price but not execution.
Trailing Stop
A stop-loss that moves automatically in the direction of profit as the market moves in your favor. It locks in gains while staying a fixed distance from the current price.
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