Locking in gains
A take profit order closes your trade automatically when it reaches a chosen profit level. It removes the temptation to hold on "for a bit more" until the gain disappears.
Where to set it
Sensible targets are usually based on the chart, for example just before the next resistance level for a buy, or the next support level for a sell.
Risk-reward ratio
Compare the distance to your take profit with the distance to your stop loss:
- Stop 30 pips, target 60 pips: risk-reward 1:2.
- Stop 30 pips, target 30 pips: 1:1.
| Risk-reward | Win rate needed to break even (before costs) |
|---|---|
| 1:1 | 50% |
| 1:2 | 33% |
| 1:3 | 25% |
A high risk-reward ratio is not automatically better. A distant target is reached less often. What matters is the combination of how often you win and how much you win compared with how much you lose, measured honestly over many trades.
Partial profits and trailing stops
Some traders close part of a position at a first target and move the stop loss to break-even on the rest. Others use a trailing stop that follows the price. These techniques reduce risk but also cut the size of winning trades, so test them on a demo account first.