How to Set a Take Profit Order

Setting a TP order is simple. Most trading platforms have a field labeled “Take Profit” or “TP” when you place or modify an order.

You enter the price at which you want the trade to automatically close and secure your profit.

For example, if you buy EUR/USD at 1.1000 and expect the price to rise to 1.1050, you would set your TP at 1.1050. If the price reaches 1.1050, your trade will automatically close, and you will realize a profit.

Calculating and Placing Take Profit Levels

These are several methods that can help you determine appropriate profit levels:

Risk-Reward Ratio

This compares your potential profit to your potential loss. A common ratio is 1:2, meaning you aim to make twice as much as you risk.

If you risk 50 pips, your forex profit target would be 100 pips. So, if you bought EUR/USD at 1.1000 and risked 50 pips (stop loss at 1.0950), your take profit levels would be 100 pips higher, at 1.1100.

Support and Resistance Levels

These are price levels where the price has historically tended to stop and reverse.

You can set your take profit just before a key resistance level in a buy trade, or just before a key support level in a sell trade.

These take profit levels act as realistic targets based on market behavior.

Let’s illustrate with an example: Suppose you identify a resistance level at 1.2500 for GBP/USD. You decide to sell at the current price of 1.2450. A good take profit level might be slightly below the support level, say at 1.2400, providing a buffer.

Common Mistakes to Avoid

Avoid these common mistakes when using TP orders:

Setting TP too close

If your TP is too close to your entry price, you might miss out on larger profits. Give the trade room to breathe.

Setting TP too far

Setting an unrealistic gain target can lead to the price reversing before your TP is hit, resulting in a missed opportunity or even a loss if you don’t use a stop loss or break even

Not adjusting TP in trending markets

In strong trending markets, most times I advise beginner traders to consider trailing their TP as the price moves in their favour, or if you can’t trail your Tp you set it on breakeven, which also helps maximise your gain potential.

Ignoring market conditions

News events or sudden market volatility can cause unexpected price movements. Be aware of these events and adjust your TP accordingly. most times Tp get affected by slippage

Benefits of Using Take Profit

Using TP orders offers several benefits, and the include:

Emotional control

Taking profit eliminates the temptation to exit a trade prematurely due to fear or greed, as greed is one of the underlying factor of losing a trade or hitting sl even after seeing some good floating profit.

Profit protection

There are situations where you get busy and you are not monitoring your trades.

If Tp is not set, price would sometimes return to your entry point.

Tp ensures you lock in profits when your target is reached, even if you’re not actively monitoring the market.

Improved risk management

With realistic, clear gain targets, you can better manage your risk-reward ratio. Most times 1:2 or 1:3 could be the best winning target.

Time management

TP orders allow you to step away from your trading platform without constantly worrying about your open positions.

Conclusion

TP  orders are essential tools for every forex trader, especially beginners

They help you manage risk, secure profits, and trade more effectively. Having a clear understanding of how to set and calculate appropriate TP levels, can significantly improve your trading performance.

Remember to consider market conditions, and also, use appropriate risk-reward ratios and avoid common mistakes like greed and FOMO.

Stop Loss (SL)

Open Order

Closed Position

Open Position

Entry Order