What Is Take Profit (TP) in Trading?
A take profit (TP) is an order that closes your trade when price reaches a level you choose. It lets you exit a winning trade…
A take profit (TP) is an order that closes your trade when price reaches a level you choose. It lets you exit a winning trade at your target, even when you are not watching the chart.
A TP works the same way on forex and other CFD trades. Below, you will see how to set one and how it affects an FXIFY account.
How a Take Profit Order Works
When you open a trade, you can add a TP price. The order is then stored on the trading server. You do not need to stay online for it to trigger.
If price reaches your TP level, the platform closes the trade. The profit then moves into your account balance.
If price never reaches your TP level, the trade stays open. It stays open until you close it, or until another order closes it, such as a stop loss.
Which Price Closes the Trade
Every CFD has two prices. The bid is the price to sell. The ask is the price to buy. The gap between them is the spread.
- Buy trade: the trade closes at the bid. Your TP triggers when the bid reaches your level.
- Sell trade: the trade closes at the ask. Your TP triggers when the ask reaches your level.
This matters most for sell trades. Your chart may show only the bid price. So the chart line can touch your sell TP while the trade stays open. The trade closes only when the ask reaches your level.
When the Closing Price Can Be Different
Price does not always move in small steps. Sometimes it jumps. This can happen when markets open after the weekend.
If price jumps past your TP level, the trade closes at the next available price. That price can be different from your TP level.
Take Profit vs Stop Loss
Both orders close a trade at a price you set. They do different jobs.
A take profit closes a trade in profit. A stop loss closes a trade at a loss level you choose before you enter.
| Take profit | Stop loss | |
|---|---|---|
| Closes the trade when | Price moves your way and reaches your level | Price moves against you and reaches your level |
| Result | A gain | A loss |
| Level on a buy trade | Above your entry price | Below your entry price |
| Level on a sell trade | Below your entry price | Above your entry price |
You can use both on the same trade. Together, they set your exit on both sides before you enter.
Take Profit vs Profit Target
These two terms sound alike. They mean different things.
A take profit belongs to one trade. You set it, and you can change it while the trade is open.
A profit target belongs to the whole account. In an FXIFY evaluation, it is the gain the account must reach to pass a step. It is part of your program rules, and you cannot change it.
A trade that closes at your TP adds to your progress toward the profit target. The TP level and the profit target are two separate numbers.
How to Set a Take Profit Level
No single TP level is correct for every trade. Two methods give you a place to start.
Use a Reward-to-Risk Ratio
Reward-to-risk compares what you aim to gain with what you are ready to lose. You choose your stop loss first. Then you place your TP a set distance away.
A pip is a small unit of price movement. This sell trade shows the method. The numbers are for learning only.
- You sell AUD/USD at 0.6620.
- You set your stop loss at 0.6650. That is 30 pips of risk.
- You aim for 1.5 times your risk, which is 45 pips.
- You set your TP at 0.6575.
This is a sell trade, so it closes when the ask reaches 0.6575. If that happens, you gain 45 pips, before spread and costs.
If price reaches your stop loss, the trade closes at a loss of about 30 pips. A price jump can make the loss larger than planned.
A higher reward-to-risk ratio does not make a trade more likely to win. A TP that is further away can take longer to reach. It may also never be reached.
Use Price Levels on the Chart
You can also place your TP near a price level the market has reacted to before.
- Support is a level where price has stopped falling in the past.
- Resistance is a level where price has stopped rising in the past.
For a buy trade, you might place your TP just below resistance. For a sell trade, you might place it just above support. Price can turn before it touches these levels exactly, so a small buffer can help.
Set Your TP on FXIFY Platforms
FXIFY offers MT5, DXtrade and TradingView. On each one, you can add a TP when you open a trade, or add it later.
How a TP Close Affects Your FXIFY Account
A TP closes a trade. A closed trade changes your account balance. On some FXIFY programs, that balance sets where your drawdown floor sits.
Programs With Trailing Drawdown
One Phase, Two Phase Standard, Instant Funding (Standard and Lite) and Lightning use trailing drawdown. Trailing drawdown is balance-based. It tracks the highest closed balance, not open trades.
When you use a TP on these programs, the floor works like this:
- An open trade does not move the floor, even when it shows a profit.
- A trade that closes at your TP can lift the account to a new highest closed balance. The floor then moves up.
- The gap between the floor and the highest closed balance stays the same in dollars. It equals the drawdown percentage of your starting balance.
Once your profit reaches the drawdown percentage of your starting balance, the floor reaches the starting balance. It then locks there and stops moving. The floor also locks at the starting balance the moment a payout is processed.
Your account breaches if your equity falls below this floor. Equity includes open trades.
Programs With Static Drawdown
Two Phase Classic, Two Phase Pro and the Three Phase Challenge use static drawdown. Static drawdown is measured from the starting balance. A trade that closes at your TP does not move this floor.
The Daily Loss Limit
The daily loss limit resets each day at 5 PM EST. It is measured from the previous day’s closing balance at that time. Your loss against that level is checked using live equity, which includes open trades.
A TP that closes before 5 PM EST adds to that day’s closing balance. That closing balance is the starting point for the next day’s limit.
Consistency Rules
Some FXIFY programs have a consistency rule. Under this rule, one trading day can only make up a set share of your total profit. A large TP win on one day counts toward that share.
Check the rules for your account on the FXIFY programs page.
Common Mistakes When Setting a TP
A TP Too Close to Entry
If your TP is very close to your entry, the spread can use up much of the gain. On a sell trade, the ask must reach your level. A very tight TP may not trigger at all.
Moving Your TP Further Away
Price gets close to your TP, so you move it further away to aim for more. Then price turns back. A trade that was close to a gain can end as a loss.
Choose your TP before you enter. Change it only for a reason you planned ahead of time.
A TP With No Stop Loss
A TP triggers only when price moves your way. When price moves against you, the TP has no effect. A stop loss sets a planned exit on the losing side as well.
Key Points to Remember
- A take profit closes a trade when price reaches a level you set.
- Buy trades close at the bid. Sell trades close at the ask.
- A TP belongs to one trade. A profit target belongs to the whole account.
- Reward-to-risk and chart levels are two ways to choose a TP.
- On trailing drawdown programs, a TP close can move your floor up. Open profit does not.
