Orders & ExecutionT/PProfit Target
Take Profit
A resting limit order that closes an open position once price reaches a chosen profit level.
What Take Profit means
A take profit is a limit order attached to an open position on the profitable side: above the entry for a long, below it for a short. Because it is a limit order it fills at the specified price or better, so unlike a stop loss it is not exposed to negative slippage, though it can benefit from a favourable gap. Its function is to remove the discretionary decision about when to bank a gain, which in practice is where a large part of an otherwise sound strategy's edge is lost.
The mechanical caveat is that a take profit needs the correct side of the quote to reach it. A long position closes on the bid, so with a one pip spread the ask must trade a pip beyond the target before the level is hit; a short closes on the ask. Traders who set targets exactly on a visible chart high frequently see price appear to touch the level without filling, which is usually this quote-side effect rather than any manipulation.
Target placement is usually expressed relative to the stop distance as a risk-reward ratio, and it interacts directly with win rate: a strategy taking two units of reward for one of risk can be profitable while winning well under half the time. Targets set at obvious structure, prior swing points or measured moves tend to fill more reliably than arbitrary round-number distances.
Worked example
Long one standard lot of EUR/USD from 1.0850 with a stop at 1.0800 and a take profit at 1.0950 risks 50 pips to make 100, a 2:1 ratio worth about USD 1,000 if the target is reached.
Related terms
- Stop LossA resting order that closes an open position once price reaches a set level, capping the loss on that trade.
- Limit OrderAn order to buy at or below a stated price, or sell at or above it, guaranteeing price but not execution.
- Risk-Reward RatioThe ratio between the distance from entry to stop loss and the distance from entry to profit target.
- OCO Order (One-Cancels-the-Other)A linked pair of orders in which the execution of one automatically cancels the other.
- Trailing StopA stop loss that automatically follows price at a set distance, moving only in the profitable direction.
Frequently asked questions
What does Take Profit mean in forex trading?
A resting limit order that closes an open position once price reaches a chosen profit level.
How does Take Profit work in practice?
The mechanical caveat is that a take profit needs the correct side of the quote to reach it. A long position closes on the bid, so with a one pip spread the ask must trade a pip beyond the target before the level is hit; a short closes on the ask. Traders who set targets exactly on a visible chart high frequently see price appear to touch the level without filling, which is usually this quote-side effect rather than any manipulation.
What is an example of Take Profit?
Long one standard lot of EUR/USD from 1.0850 with a stop at 1.0800 and a take profit at 1.0950 risks 50 pips to make 100, a 2:1 ratio worth about USD 1,000 if the target is reached.
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