A take profit is an order that automatically closes a trade when the price reaches a predetermined profit target. It locks in gains without requiring you to monitor the trade constantly. Take profit orders work alongside stop losses to define the complete risk-reward profile of every trade.
How Take Profit Orders Work
When you set a take profit, you specify the price at which you want to exit with profit. Your broker closes the trade automatically when that price is reached.
Example
- You buy EUR/USD at 1.0850
- You set a take profit at 1.0910 (60 pips above entry)
- You set a stop loss at 1.0820 (30 pips below entry)
- Risk-reward ratio: 1:2 (risking 30 pips to gain 60)
- If EUR/USD reaches 1.0910, your trade closes with 60 pips profit
Take Profit Strategies
Fixed R:R target
Set take profit at a fixed multiple of your stop loss distance. If your stop is 30 pips, a 2R target means 60 pips. Simple and consistent.
Structure-based target
Set take profit at key support/resistance levels, previous swing highs/lows, or Fibonacci extensions. This aligns your exit with where the market is likely to react.
Partial take profit
Close a portion of your position at the first target (e.g., 50% at 1R), then let the rest run with a trailing stop. This secures some profit while leaving room for larger moves.
No take profit (trail only)
Some trend-following strategies don’t use fixed take profits. Instead, they trail the stop loss to capture as much of the move as possible. This sacrifices win rate for larger average winners.
Common Take Profit Mistakes
1. Exiting too early
Closing trades before they reach your planned take profit is one of the most common behavioral patterns. Fear of giving back profits leads traders to grab small wins, reducing their average winning trade size and damaging overall expectancy.
2. Moving take profit further
Greed can cause traders to extend their take profit target when a trade is going well. While it sometimes works, it often results in a profitable trade reversing to a loss.
3. No take profit at all
Without a target, you’re relying on real-time judgment to exit — which is vulnerable to emotions, distraction, and poor timing.
Take Profit and Risk-Reward Ratio
The distance between your entry and take profit, relative to your stop loss, determines your risk-reward ratio.
| Stop Loss | Take Profit | R:R | Win Rate to Break Even |
|---|---|---|---|
| 30 pips | 30 pips | 1:1 | 50% |
| 30 pips | 45 pips | 1:1.5 | 40% |
| 30 pips | 60 pips | 1:2 | 34% |
| 30 pips | 90 pips | 1:3 | 25% |
Higher R:R ratios mean you can be profitable with a lower win rate. This is why experienced traders often accept lower win rates in exchange for larger average winners.
Tracking Take Profits in Your Journal
Your trading journal should track:
- Planned vs. actual take profit — Did you exit at your target or before?
- Maximum favorable excursion (MFE) — How far did the trade go in your favor? If it consistently goes beyond your TP, your targets may be too conservative
- Take profit hit rate — What percentage of trades reach full target?
- Partial exit impact — If you take partials, does it improve or hurt your overall expectancy?
PipJournal tracks your take profit accuracy, measures maximum favorable excursion, and alerts you when you’re consistently exiting trades too early.
