Take Profit

Once a trade is opened, a "take profit" is (optionally) set at a particular price so that if the trade goes the right way, the trade will be automatically closed by your broker at a profit.

Whereas a stop loss is mandatory, take profits are optional. The reason is that there are 3 ways to exit a trade:

1. The take profit is hit, in which case the broker will close your trade automatically at the requested price.
2. Exit the trade at market - i.e. right now, at wherever the current price is. Whether you make a profit or not on this trade is determined by where the current price is in relation to the entry price.
3. As the price goes more and more in your favour, you gradually move your stop loss to follow the price (i.e. a trailing stop). The hope is that eventually your stop loss is above your entry price. Once the price turns around and the stop loss is taken out, your broker will close your trade automatically at the requested price.

The other difference between take profits and stop losses is that a take profit can be moved up or down at any time, for both long trades and short. A stop loss may never be moved to a position where you were risking more money than before.

See also::

• stop loss