GLOSSARY
Take profit
The exit you choose for a trade that works — decided before hope gets a vote.
Updated 2026-09-04 · Educational content · No broker owns this site
Quick answer. A take profit is an order that closes a trade once price reaches a chosen profit level. Paired with a stop loss it fixes the risk-to-reward ratio of the trade before you enter, and it closes the position without you watching the screen.
A take profit is a resting order that closes your position at a price you nominate on the profitable side. It is the mirror image of a stop loss: one ends the trade when you were wrong, the other when you were right enough.
Its quieter function is arithmetic. Once the stop and the target are both set, the trade has a ratio — how much you are risking against how much you are trying to make — and you can judge it before committing rather than afterwards.
How does a take profit set the risk-to-reward ratio?
Buy EUR/USD at 1.1000 with one mini lot, where one pip is $1:
| Level | Price | Distance | Cash |
|---|---|---|---|
| Stop loss | 1.0980 | 20 pips | −$20 risk |
| Entry | 1.1000 | — | — |
| Take profit | 1.1040 | 40 pips | +$40 reward |
$40 ÷ $20 = a 1:2 ratio. That ratio is a plan, not a probability: a 1:2 trade is not twice as likely to work, and a good ratio on a weak idea is still a weak trade.
Where should a take profit go?
At a level the market plausibly reaches — a prior high or low, the edge of a range, a structural level you can point at — rather than at a round number that produces a flattering ratio. Setting the target from the ratio backwards is how people end up with a 1:5 plan that price never comes close to filling.
Note that the exit price is quoted on the side you close at: a long position closes at the bid, so the spread has to be covered before the target is reached.
What do beginners get wrong?
The frequent one is moving the target further away while the trade is running, because it feels like the move will continue. That converts a planned win into an unplanned position and often gives the profit back. Deciding the exit before entry is the entire point.
The opposite error is closing early on every small profit while letting losses run to the stop. A run of small wins and full-size losses is a losing arrangement even when most trades are green.
Related terms
Frequently asked questions
What is a good risk-to-reward ratio?
There is no universally correct number, and a ratio on its own says nothing about whether a trade will work. What matters is that the target sits at a level price can realistically reach, and that you chose both levels before entering.
Should I use a take profit or exit manually?
A resting take profit closes the trade whether or not you are watching, which removes the moment where hope decides the exit. Manual exits can work, but they require a written rule you actually follow.
Can price hit my take profit and I still lose money?
The gross move can be positive while spread, commission or an overnight swap charge leave the net result smaller than expected. On short holds the effect is minor; on positions held for days the financing cost matters.
Sources
- CFTC Customer Advisory — Eight Things You Should Know Before Trading Forex (2026)
- CFTC Office of the Chief Economist — Stop Orders in Select Futures Markets (2026)
- FirstPip knowledge base — risk/breakeven-stop-and-trailing-stop, risk/risk-per-trade