What is take profit? Targets and reward-to-risk

A take profit (TP) is an order that closes your trade automatically when the price reaches the profit target you chose. It's the partner of the stop loss: one caps the loss, the other locks in the gain.

Why use one?

• It removes emotion. Without a target, traders close winners too early out of fear and hold losers too long out of hope.
• It works while you're away. The order sits on the broker's server, so it fills even if your phone is off.
• It forces a plan. If you can't say where you'd take profit, you can't judge whether the trade is worth taking.

Reward-to-risk: the number that matters

Compare the distance to your take profit with the distance to your stop:

Reward : Risk = (Target − Entry) ÷ (Entry − Stop)

Example: buy gold at 2,650, stop at 2,640 ($10 risk), take profit at 2,670 ($20 reward) → 2 : 1, also called a 2R target.

The higher your reward-to-risk, the lower the win rate you need to break even:

But a far-away target is hit less often. The balance between the two is explained in win rate vs. reward-to-risk.

Where to put the target

Use the chart, not a fixed number:

• Before the next obstacle: just below resistance for a buy, just above support for a sell. Price often stalls there.
• At a recent swing high or low.
• A multiple of your risk (1.5R, 2R) when there's no clear level.

If the nearest sensible target is closer than your stop, the trade usually isn't worth taking.

Partial take profit

Many traders split the exit: close half at 1R or 1.5R, move the stop to breakeven, and let the rest run to a further target. You lock something in and still catch bigger moves. In MetaTrader you can close part of a position by double-clicking it and choosing a smaller volume to close.

Setting a TP in MetaTrader 5

• Fill in Take Profit when you open the order, or
• Right-click the open trade → Modify, or drag the green dotted line on the chart.

Common mistakes

1. Moving the target further away when price gets close because "it looks strong". Decide in your plan whether you trail or not, then follow it.
2. Targets that ignore costs. On small targets, spread and commission eat a big share (hidden costs).
3. No target at all, so every winner turns into a breakeven trade.

Put stop, target and size together in one routine: what is risk management?