Take profit trader
Family II · Orders
Not to be confused with forex trader, take profit, take profit order.
Take profit trader describes a trader whose routine method of closing a winning position is a pre-placed take profit order, not a discretionary exit. The label refers to the exit habit, not to a strategy, instrument or licence. A take profit trader may trade any market and any timeframe.
How the exit works
A take profit order is a limit-type instruction attached to an open position. It rests with the broker until the market trades at the specified level, at which point the position is closed automatically. The trader sets the level in advance, so the exit does not depend on being at the screen when the price arrives.
Because the order is a limit, the fill is at the stated price or better. Slippage in the trader's favour is possible; slippage against the trader is not, unlike a market order. If the market never reaches the level, the order remains unfilled and the position stays open.
Worked example
A trader buys 1 standard lot of EUR/USD at 1.0850 and places a take profit at 1.0900, 50 pips above entry. One pip on a standard lot is USD 10.
The figure is gross. Commission, spread and any swap or financing charges are deducted separately, so the net result is lower.
What the label does and does not mean
It says nothing about how the entry is chosen, how large the position is, or how the take profit level is calculated. Those are separate decisions. A take profit trader may use technical levels, a fixed multiple of the stop distance, or a volatility measure to set the target.
- The order type is the defining feature, not the analysis behind it.
- Rules on attaching take profit orders to an existing position, and on whether they can be amended or cancelled, vary by broker and by platform.
- Regulatory treatment of guaranteed stops, if offered at all, differs by jurisdiction.
Often confused with
- forex trader
- A forex trader is defined by the market traded, foreign exchange, whereas a take profit trader is defined by the exit method used; the visible sign is the instrument quoted in the position, such as a currency pair.
- take profit
- Take profit is the target level or the act of closing at a gain, while a take profit trader is the person who routinely exits that way; the visible sign is whether the term names a price or a participant.
- take profit order
- A take profit order is the resting instruction itself, whereas a take profit trader is the market participant who places such instructions; the visible sign is whether the term appears as an order ticket entry or as a description of a person.