Take profit
A take profit is the mirror of a stop loss: an exit order at a price better than the current one. When the market touches it, the position closes and the gain is realized without intervention.
The ratio between take-profit distance and stop-loss distance (the reward-to-risk ratio) interacts with win rate: a strategy that wins small and loses big needs a very high win rate to survive; one that wins big and loses small can be profitable while losing most of its trades.
Covered in depth in Lesson 03: Risk management before anything else.
Related terms
- Stop loss — An order that closes a position automatically at a predefined worse price, capping the loss on a trade.
- Risk per trade — The fraction of account equity a single trade can lose if its stop loss is hit.
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