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Take profit definition
A take profit is an order that closes an open position once it reaches a profit level you set in advance. It locks in the gain automatically, so you do not have to watch the market to exit.
On a long position you place the take profit above the entry price; on a short position you place it below. When price reaches the level, the order triggers and the trade closes in profit. Traders set the level from support and resistance, price targets, indicators, market structure, or a fixed risk-reward ratio.
A take profit closes the trade on the winning side of your entry; a stop loss closes it on the losing side. Used together, the two bracket a position, with the take profit capping the gain you will accept and the stop loss capping the loss. A take profit can still miss a larger move if price runs well past your target.
Take profit Example
You buy EUR/USD at 1.0850.
You set a take profit at 1.0900:
1.0900 - 1.0850 = 0.0050, or 50 pips
If EUR/USD rises to 1.0900, the take profit triggers and closes the position for a 50-pip gain, before costs or slippage.
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