What is Take Profit?
An automatic order that closes a position at a pre-set profit level — locks in gains without monitoring.
A take-profit (TP) is a pending order at a price level past your entry that closes the position with a locked-in gain when reached. It removes the "should I close now?" decision from the trade and prevents holding too long.
The risk-reward ratio (RR) is the relationship between stop and target: a 50-pip stop with 100-pip target = 1:2 RR. Most systematic strategies require RR ≥ 1.5 to be net profitable with realistic win rates. Pure 1:1 RR strategies need a 50%+ win rate just to break even after spread/commission costs.
Some traders skip the TP and instead trail their stop-loss as the position moves in favor, capturing larger moves when they happen. This works on trending strategies; less well on mean-reverting strategies where the TP catches the rebound.