What Is Take Profit?
A take profit (TP) order is a standing exit placed above entry (for longs) or below (for shorts) that closes the trade at a predefined target price. It removes the discretionary decision of when to exit a winning trade, forcing systematic profit-taking.
Target placement is typically driven by structure (next resistance level for longs), measured moves (the height of a pattern projected from the breakout), or risk-reward math (target = entry + 2× stop distance for 1:2 R:R).
A classic technique is scaling out: take partial profits at the first target, move the stop to breakeven on the remainder, and let the rest run toward a more ambitious target. This balances locking in gains against capturing big winners. The simplest implementation: 50% off at 1R profit, move stop to entry, let the rest run.
Related terms
- Stop Loss — A predefined exit price that limits losses if a trade moves against you.
- Risk/Reward Ratio — The ratio of potential profit to potential loss on a trade.
- Position Sizing — Determining how many shares or contracts to trade based on account size and risk tolerance.