What is Take Profit?

A “take-profit” is an instruction placed with a broker to automatically close the trade when the price reaches the “target profit”. For example, 

• Suppose a trader buys EUR/USD at 1.1000.
• They set a take-profit level at 1.1100. 
• If the market reaches that level, the broker attempts to close the position and realise the gain.

However, note that a take-profit order does not guarantee execution at the exact price set by the trader. During highly volatile market conditions, if the price jumps over the take-profit level, the order may be executed at the next available market price.

How to Set a Take Profit in Trading?

For a “buy” trade, the take-profit price is usually placed above the entry price. For a “sell trade”, it is placed below the entry price. Generally, the take-profit level can be based on various factors such as:

• Support and resistance levels
• Technical indicators
• Price targets, or  
• Any predefined risk-reward ratio

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