Take profit
Family II · Orders
Not to be confused with take profit order, take profit trader, take profit stop loss.
Take profit is a price level at which an open position is closed automatically so that an accumulated gain is realised. It is an exit instruction, not an entry signal, and it is usually placed at the same time as the order that opens the trade. Once the market touches the specified price, the position is squared off and no further profit or loss accrues from it.
How a take profit works
A take profit is submitted as part of an order ticket or added to an existing position. It sits on the broker's server, or locally in the trading platform, and is triggered when the bid or ask reaches the chosen level. For a long position the take profit is placed above the entry price; for a short position it is placed below.
Execution is not guaranteed at the exact level. Slippage, gaps and fast markets can fill the exit at a different price. Whether a take profit can be attached to a market order, a limit order or a stop order, and whether it is held server-side, varies by broker and platform.
Worked example
Placement and adjustment
A take profit can be set when the trade is opened or added later. Many platforms allow it to be modified or cancelled while the position remains open. Some brokers require a take profit to be entered with the opening order, while others permit it to be attached afterwards. The distance from entry is a matter of strategy, not a fixed rule.
Often confused with
- take profit order
- A take profit order is the specific instruction type that carries the take profit level, whereas take profit is the price level itself; the visible sign is that the order appears as a line item in the order book or ticket.
- take profit trader
- A take profit trader is a person who habitually exits at a predetermined gain, while take profit is the exit instruction; the visible sign is that one refers to a market participant and the other to an order parameter.
- take profit stop loss
- A take profit stop loss is a paired order setup in which a take profit order closes a position at a target profit and a stop loss order closes it at a predetermined loss, both attached to the same open trade.