A take profit order is a limit order that automatically closes your position when price reaches a specified target level. Like a stop loss, it executes without manual intervention — when your target is hit, the trade closes and the profit is realized. It enforces trading discipline by locking in gains at your pre-planned exit point, before emotions can override the decision.
How to Set a Take Profit Level
Take profit levels should be placed at logical technical levels — not at arbitrary distances. For a long trade, common targets include:
- Previous resistance levels where price has reversed in the past
- Round numbers where sell orders often cluster (though slightly before them)
- The top of a measured move from a chart pattern (head and shoulders, flag, triangle)
- A Fibonacci extension level (1.272, 1.618) from the prior swing
The target should exist for a technical reason, not simply because it produces a 2:1 R:R ratio. Setting a target at a random price that happens to give you a 2:1 ratio — but lands in the middle of a congestion zone — will rarely be hit cleanly.
Take Profit and Risk/Reward
The relationship between your stop loss distance and your take profit distance defines your risk/reward ratio. If your stop is 20 pips below entry and your take profit is 40 pips above, your R:R is 1:2. This means you can be wrong on half your trades and still break even on the strategy.
Use the Take Profit Calculator to find the exact price level for any target R:R, given your entry and stop loss. Use the Risk/Reward Calculator to check what ratio a given target actually gives you.
Partial Take Profits
Some traders close half the position at the first target and trail the stop on the remainder to capture larger moves. This locks in a guaranteed profit while leaving exposure for a bigger run. The trade-off: the trailing portion often gets stopped out on a retest, so average exit is typically between the first and second target rather than the full second target.