What is a Take Profit?
Take Profit term defined as the trading order that allows you to get the profit in a fixed or certain amount when the price reaches a certain level. In the other term take profit is the order in which the trader sets the level of profit and once the price of the instrument reaches the specified price, trade will be closed automatically.
- T/P orders are limits that are closed when specified profit level is reached.
- Limit prices for Take Profit orders are placed using either technical or fundamental analysis.
- T/P orders are beneficial for short-term traders interested in profiting from an instant jump in the trading instrument costs.
To explain in brief let’s take an example of Long and Short Trade
Suppose you open a long position and enter the market at a price 1.23450 in a hope that prices will go high. Now to gain profit from rise you place a take profit limit at 1.2679. If trader bid price hit the Take Profit price at 1.2679, the position is closed in profit.
Now in case if a trader wants to open a short trade and enter the market at a price 1.23450 in a hope that price will go down. Now to gain profit from fall he place a take limit at 1.21659. If trader’s ask price hit the take profit price at 1.21659, the position is closed in profit.