A take profit is the other half of the plan you make before the trade starts. The stop says where you're wrong, the target says where you're done being right. Set it in advance and the trade has a known outcome... leave it open and the exit gets decided by how you feel while the position is running.
What is a take profit?
An order above your entry for a long, or below it for a short, that closes the position when price gets there. The distance from entry to that price is the reward side of your risk reward ratio, measured against the distance to your stop loss. Set both before you enter and your trade has a fixed shape in R multiples no matter what the market does.
Where do you put it?
Four common approaches, and each buys something at a price:
| Method | Where the exit goes | What you trade away |
|---|---|---|
| Fixed R multiple | a set multiple of your stop distance, like 2R | easy to test, but it ignores where price actually struggles |
| Structure | just before the level price has to break | fewer giveaways, though the distance changes every trade |
| Trailing stop | no fixed target, you exit when price turns | catches the big moves, gives back part of every winner |
| Partial exits | some at a target, the rest trailed | smoother equity curve, smaller best trades |
Should you take profit early?
Here is the part that trips people up... moving a target closer raises your win rate and lowers your average winner, and those two cancel out more often than people expect. The pair is what matters. Cutting winners at 1R while your losers still run to the full stop is how a system with a real edge turns into a losing one, and it feels responsible the whole time.
Fixed or trailing?
Your own trades answer this, not an argument on a forum tbh. Take a part of closed trades, mark where each one would have exited under each rule, and compare the expectancy you get. A trailing stop usually trades a lower win rate for a few much larger winners, so it needs a bigger sample before the comparison means anything. If most of your edge comes from one trade in twenty, a fixed target removes your edge.
What nobody tells you
A resting target is a limit order, so price touching your level is not the same as filling you. Low liquidity and fast moves can trade through without filling the whole order, so depending on the broker you can have the whole trade running, partial volume closed or position fully closed at the price the broker was able to close the full volume.
Frequently asked questions
Related terms
- R Multiple — Every trade measured against what you risked, where a full stop is always minus 1R.
- Slippage — The gap between the price you expected and the price you actually got.
- Trading Costs — Broker-reported commissions and fees, plus components computed from an exact verified schedule.
- Live vs Backtest — The gap between how a strategy looked in testing and how it performs with real money.