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Take profit (order)

Take Profit Order

Risk management

Definition

An exit order that closes a winning trade at a predetermined level, the profit target. It is the sibling of the stop loss: the stop determines where the trade is proven wrong, and the take profit determines where you take profit without waiting with your hand on the mouse.

Detailed explanation

A take profit is a limit order placed in the market. In a long position it sits above the entry price and in a short position below it, and when price reaches it, it fills at its price or better. On trading platforms, it is usually configured together with the stop as a Bracket (OCO) order: when one fills, the other cancels. You determine the distance according to the chart and the risk-to-reward ratio, not by gut feeling. A target of 2x the stop means you only need to succeed in less than half of your trades to be profitable over time. And do not confuse them: Take Profit Trader (TPT) is an American prop firm for futures traders. Its name is taken from the order, but there is no connection between them.

An example from the prop world

Long on MNQ at 20,000 with a stop of 20 points at 19,980 and a target of 2x. The take profit sits at 20,040. If price reaches it, the trade closes with a profit of 40 points, $80 per contract, and the stop cancels automatically.

Stop loss

An exit order that closes a losing trade at a predetermined level. In a prop account, a stop is not just good risk management: it's what separates a bad trade from crossing the drawdown threshold and failing the account.

OCO and Bracket orders

A Bracket is an entry order that comes with a stop and a profit target. OCO (One Cancels Other) links the two exit orders: when one is filled, the other is canceled automatically.

Risk-reward ratio

The ratio between what a trade risks until the drawdown and what it can earn until the target. A ratio of 1:2 means that for every dollar at risk, the target is two dollars. The ratio alone doesn't say much: it is read together with the success rate.

Order types: market, limit, and stop

A Market order fills immediately at the next available price. A Limit order fills only at the price you set or better, so it may not fill at all. A Stop order becomes a Market order when the price touches the level you set, which is how a stop loss is placed.

Trailing drawdown (order)

A stop order that automatically moves with the price when the trade is profitable, at a fixed distance, and does not move back. It locks in some profit without deciding in advance where to exit. Do not confuse it with the trailing drawdown: the trailing stop is your tool, and the trailing drawdown is an account rule.

End-of-day (EOD) trailing drawdown

End-of-day drawdown (EOD Drawdown) is a trailing maximum loss limit rule in which the loss threshold moves up only once a day, based on the closing balance. At most firms, however, the threshold itself is enforced in real time, so touching it during the trading day fails the account.