What is Take Profit in Trading and How to Use It?
Learn about Take Profit in Forex trading — how it differs from Stop Loss, strategies for setting profit targets, and the importance of automating your trade management.
What is Take Profit?
Take Profit (TP) is a pre-set order you place on your trading platform to automatically close a trade when the price reaches a specified profit level. Its primary purpose is to secure your profits at a predetermined level without needing to monitor the screen or make a manual decision.
For example: If you buy EUR/USD at 1.1000 and set Take Profit at 1.1050, the system will automatically close the trade when the price reaches 1.1050, guaranteeing you a 50-pip profit.
💡 Why is Take Profit Important?
Traders often fall into the greed trap — they want more profit so they keep the trade open, then the price reverses and they lose everything. Take Profit removes emotion from the decision and ensures the planned profit is realized.
Take Profit vs Stop Loss
Both are automatic orders to close a trade, but in different directions:
| Comparison | Take Profit | Stop Loss |
|---|---|---|
| Function | Closes at profit | Closes at loss |
| Position | Above entry (for buy) | Below entry (for buy) |
| Goal | Secure gains | Limit losses |
| Necessity | Highly recommended | Mandatory |
Strategies for Setting Take Profit
Setting Take Profit isn’t random. Here are the main strategies:
1. Based on Technical Analysis
Place Take Profit at a strong resistance level (for buy) or strong support level (for sell). If you buy from support, set the target at the next resistance.
2. Based on Risk/Reward Ratio
If your stop loss is 50 pips and you target a 1:2 ratio, set Take Profit at 100 pips. This ensures your profits double your losses.
| Risk/Reward | Stop Loss | Take Profit | Rating |
|---|---|---|---|
| 1:1 | 50 pips | 50 pips | Not recommended |
| 1:2 | 50 pips | 100 pips | Good |
| 1:3 | 50 pips | 150 pips | Excellent |
3. Based on Fixed Pips
Some traders prefer a fixed profit target like 30 or 50 pips per trade, regardless of analysis. This is simple but may not be ideal in all market conditions.
Partial Take Profit
Partial Take Profit is an advanced strategy where you close part of the trade at an initial profit target and leave the rest open for a larger gain.
Example: You buy 2 lots of EUR/USD at 1.1000.
- At 1.1030 (30 pip profit): Close 1 lot → secure $300
- Move stop loss on remaining lot to 1.1000 (Break Even)
- At 1.1060 (60 pip profit): Close remaining lot → $600 more
- Total: $900, with zero risk after the first target
💡 Benefits of Partial Take Profit
This strategy balances securing quick profit with capitalizing on strong trends. It reduces psychological pressure and increases confidence in the trade.
Automating Take Profit
Instead of setting Take Profit manually on every trade, you can automate the entire process:
- Automatic TP: Set a fixed rule (like 50 pips per trade) and the system applies it automatically.
- Auto Partial Close: Closes part of the trade at the first target, then moves the stop for the remaining portion.
- Trailing Take Profit: Follows the price and closes on reversal, maximizing trend capture.
If you use a platform like TV2Broker, you can apply all these rules automatically on every trade without manual intervention.
Frequently Asked Questions
What is Take Profit?
Take Profit is a pre-set order that automatically closes a trade when the price reaches a specified profit level, allowing you to secure gains without monitoring the screen.
What is the difference between Take Profit and Stop Loss?
Take Profit closes the trade at a profit to secure gains, while Stop Loss closes it at a loss to prevent further losses. Both are essential for proper trade management.
How do I determine the Take Profit level?
You can set Take Profit based on technical analysis (resistance/support levels), Risk/Reward ratio (like 1:2), or a fixed number of pips.
Can I use Partial Take Profit?
Yes, you can close part of the trade at an initial target and leave the rest for a larger target. This is an advanced strategy that balances securing profit with capitalizing on trends.
Want to Automate Your Take Profit Rules?
With TV2Broker, you can apply Take Profit, Partial Close, and Trailing Stop automatically on every trade without manual intervention.