What is Take Profit Order and Why You Should Use It

Becoming profitable in forex trading is not about finding great opportunities and win every trade (which is impossible), but to know the price at which you plan to close. 

Today all trading platforms allow you to place stop/loss orders, which close the moment the desired level is reached. This provides the best money management a trader can ask for.

What is Take Profit Order

A reverse of stop-loss order is called Take Profit Order. If the currency goes up and reaches a certain level, it is sold and profits are captured.

You use this order when you wish to close the positions when a profit level is reached. Take profit orders are also sometimes referred to as limit orders. An online forex take profit order is the opposite of a stop-loss order, meaning

When using take profit orders, you specify take-profit point – the number of pips from the current trading price point. As soon as the take-profit point is reached, the trade is automatically closed. 

Example

You buy $1000 worth Euro when USD/EUR is at 1.442, which is 1,442 Euro.

Then you place a take profit order at 1.470

When USD/EUR reaches 1.470 level, the order is executed for 1,470 Euro with a profit of 28 Euro or $19.04

Reasons to Use Take Profit Order

Forex traders who use a take profit order are able to secure profits to limit losses if the direction of the market shifts. Placing take profit order allows you to have a great trading plan and use strict money management techniques.

You should consider placing take profit order when the market shows the sign of resistance on your buy order, which can result in loss if you aren’t careful. Take profit order is also useful, if you cannot spend all day long in front of the computer waiting for the right moment to close the trade.

Keep in mind that when placing a take profit order, you are limiting yourself to the price level previously selected. You might miss on extra profit if the market continues with the trend, but you have already exit the trade.

However, you are better safe than sorry. Opportunities will happen again and you will be able to jump right back in if your account has money instead of being empty!

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