What Is Take Profit? Master Exit Strategies for Maximum Trading Gains

What is take profit? It’s an instruction to automatically close trades at specific rates when prices move favorably, locking in gains. This guide explains what is a take profit order, how to set them on NinjaTrader, Tradovate, and systems used by take profit trader and Apex Trader Funding, plus risk-reward placement strategies.

Understanding What Is Take Profit in Trading

What is take profit in trading? A take profit (TP) is an instruction to close a trade at a specific rate if price moves in your favor, ensuring profit is realized and goes to your available balance. If market reaches your requested rate and you’ve gained the predetermined amount, the take profit triggers and automatically closes your position.

Think of take profit orders as automatic profit collection machines. Instead of watching charts constantly deciding when to exit, you set your desired profit level in advance. When that price hits, your position closes automatically, transferring gains to your account without requiring you to be present or make split-second decisions.

Under normal market conditions, the set take profit is not guaranteed. When markets are volatile, the take profit rate you requested may not be traded. In this case, the take profit triggers at the next available rate. This slippage can work in your favor or against you depending on volatility direction.

You can adjust take profit at any time while trades are open. Maximum take profit on most trades is 1,000% of invested amount +/- 1,000% of current P&L. This means you can update your take profit level continually as profits increase, allowing winning trades to run while maintaining downside protection.

A take profit is mandatory on every position with exception of non-leveraged BUY positions. This requirement exists because leveraged positions carry higher risk, necessitating predefined exit strategies to prevent catastrophic losses from rapid reversals.

What Is A Take Profit Order: Types and Mechanics

What is a take profit order technically? Also known as ‘limit closing order,’ it’s a type of limit order where you set an exact price. Your trading provider uses this price to close open positions for profit. If the limit order doesn’t hit the limit price, the order remains inactive.

Take Profit Order Components

Target Price: Specific rate where position automatically closes

Position Size: Amount of asset being traded

Order Duration: Good-til-canceled (GTC) or day orders

Execution Type: Limit order ensuring price or better

Many traders use take profit orders collaboratively with stop-loss orders to manage risk surrounding open positions. If you go long on an asset and it rises to the take profit point, the order executes automatically and position closes for gain. If the asset falls instead, stop-loss order executes to minimize losses at level attuned to your risk tolerance.

Accordingly, the difference between asset’s market price and your take profit and stop-loss orders represents the trade’s maximum risk-reward trade-off. This creates clear parameters before entering positions, eliminating emotional decisions during live trading.

Take Profit vs Stop Loss: How They Work Together

Understanding what is take profit requires understanding its relationship with stop-loss orders. A stop-loss order—officially known as ‘stop closing order’—is used by traders to limit loss or lock in remaining profit on existing positions. It’s key risk management tool.

Stop-loss orders carry instructions to close positions by buying or selling assets—depending on whether you’re long or short—at market when they reach set prices (stop prices). Imagine a trader buys an option on stock and places stop-loss order 5% below purchase price. The stock subsequently falls 5%, triggering stop-loss, so stock is sold at best available price.

Risk-Reward Ratio Example

Imagine trader opens long position on asset and expects 20% rise. They may place take profit order 20% higher than bought-at price and stop-loss order 5% below bought-in price. This creates favorable 5:20 risk-to-reward ratio (1:4), assuming odds of each outcome are equal or skewed towards upside.

This systematic approach removes guesswork from trading. Before entering positions, traders know exactly how much they stand to gain (20%) and how much they risk losing (5%). If trader makes ten such trades and wins half of them, they profit overall even with 50% win rate due to favorable risk-reward ratio.

How To Set Take Profit Orders on Trading Platforms

Setting take profit orders varies slightly across platforms like NinjaTrader, Tradovate, and prop trading firms like Apex Trader Funding, but the core process remains similar:

Step-by-Step Setup Process

Research Your Market: Use technical and fundamental analysis to identify opportunities

Select Your Opportunity: Choose specific asset and entry price

Determine Position Size: Calculate appropriate risk per trade (typically 1-2% of capital)

Set Stop-Loss Level: Place stop-loss below entry for longs, above for shorts

Calculate Take Profit: Use support/resistance levels, Fibonacci extensions, or risk-reward ratios

Place Combined Order: Enter position with both TP and SL attached

Monitor Execution: Verify orders are active and adjust if market conditions change

Platform-Specific Features

NinjaTrader: Advanced order entry window allows OCO (One-Cancels-Other) orders where take profit and stop-loss are linked. When one executes, the other cancels automatically. Chart trading enables visual TP/SL placement by dragging price levels.

Tradovate: Browser-based platform offers DOM (Depth of Market) trading with quick TP/SL setup. Automated trading strategies can include predefined take profit levels based on algorithmic conditions.

Apex Trader Funding: Prop trading firm requires traders to use both take profit and stop-loss orders to pass evaluation phases. Their rules typically mandate maximum daily loss limits and overall drawdown limits, making TP orders crucial for protecting gains.

Calculating Optimal Take Profit Price Levels

How do you calculate best take profit and stop-loss price levels? Deciding optimal prices depends on numerous factors varying significantly trade to trade. Examples include personal risk appetite, security volatility, and short-term versus long-term investing goals.

Many traders use technical analysis tools such as support and resistance levels to identify good prices for entry points, take profit, and stop-loss levels. Some assets can be studied to recognize whether retracements are common, requiring more active stop-loss and re-entry strategies.

Common Take Profit Calculation Methods

Fixed Percentage: Set take profit at predetermined percentage above entry (e.g., 10%, 15%, 20%). Simple but ignores market structure and technical levels.

Support/Resistance: Place take profit just before major resistance levels where price likely encounters selling pressure. Most reliable method as it respects market structure.

Fibonacci Extensions: Use 127.2%, 161.8%, or 200% Fibonacci extension levels from recent swing points. Popular among technical traders for targeting breakout moves.

Risk-Reward Ratios: If stop-loss is 50 pips below entry, place take profit 100-150 pips above for 1:2 or 1:3 ratio. Ensures profitable long-term trading even with moderate win rates.

ATR-Based: Use Average True Range indicator to set take profit at 2-3x ATR distance from entry. Adapts to volatility automatically.

Advantages and Disadvantages of Take Profit Orders

Advantages

Emotion Elimination: Traders don’t need to track trades throughout the day or second-guess themselves over how high (or low) assets may go. This keeps emotion out of trading decisions.

Risk Management: Short-term traders can manage risk because they exit trades the moment planned profit targets are reached, avoiding risking possible downturns.

Technical Alignment: Take profit orders can be placed at levels supported by technical analysis tools such as chart patterns or money management systems.

Automation Benefits: The automated nature makes managing risk easier, especially for traders handling multiple positions simultaneously or unable to monitor markets constantly.

Disadvantages

Opportunity Costs: Take profit orders execute at pre-set prices regardless of asset behavior. If assets start breaking out higher, orders still execute, resulting in opportunity costs from missed additional gains.

Reduced Long-Term Profits: Long-term investors using take profit orders may reduce risk but also reduce potential profits from extended trends.

False Security: Automating trades can make traders lazy, leading to inadequate analysis before entering positions or improper TP placement.

Gap Risk: During volatile markets or overnight gaps, actual execution prices may differ from set take profit levels, sometimes significantly.

Is Take Profit Trader Legit? Prop Firm Overview

Is take profit trader legit? Take Profit Trader is a proprietary trading firm offering funded accounts to traders who pass evaluation phases. The company provides capital to successful traders while taking percentage of profits. Like Apex Trader Funding and other prop firms, Take Profit Trader requires adherence to strict risk management rules including mandatory take profit and stop-loss orders.

The legitimacy of Take Profit Trader depends on meeting regulatory requirements and maintaining transparent payout structures. Reviews from trader communities suggest mixed experiences, with some traders successfully withdrawing profits while others report challenges with evaluation rules or payout delays. As with any prop trading firm, thoroughly research terms, understand evaluation criteria, and verify regulatory status before paying for challenges.

Prop firms like Take Profit Trader, Apex Trader Funding, and others using platforms like NinjaTrader or Tradovate typically require traders to demonstrate consistent profitability with strong risk management before providing capital. Take profit orders form crucial part of evaluation criteria, as firms want to ensure traders protect gains rather than giving back profits through poor exit strategies.

FAQ

What is take profit?

Take profit is an instruction to automatically close a trade at specific rate when price moves in your favor, locking in gains without manual intervention. It’s essential risk management tool eliminating emotional exit decisions.

What is take profit in trading?

In trading, take profit is a limit order that closes positions automatically when assets reach predetermined profit levels. It defines maximum gain targets and works with stop-loss orders to create clear risk-reward ratios.

What is a take profit order?

A take profit order is a type of limit order specifying exact price where your trading provider closes open positions for profit. If price doesn’t reach the limit, the order remains inactive until triggered or canceled.

Is take profit trader legit?

Take Profit Trader is a proprietary trading firm offering funded accounts to traders passing evaluations. Legitimacy depends on regulatory compliance and payout transparency. Research reviews and terms carefully before paying for challenges.

How much profit does amazon take from sellers?

Amazon takes 8-45% referral fees depending on product category, plus fulfillment fees if using FBA. This question relates to business profit-sharing, different from trading take profit orders which refer to exit strategies.

How do you set take profit on NinjaTrader?

In NinjaTrader, use the Chart Trader or Order Entry window to attach take profit orders when entering positions. Set target prices based on technical analysis, risk-reward ratios, or percentage gains. OCO orders link TP and SL automatically.

What’s the ideal risk-reward ratio for take profit orders?

Most professional traders target minimum 1:2 risk-reward ratios (risk $100 to make $200) or better. This allows profitability even with 40-50% win rates. Higher ratios like 1:3 or 1:4 provide more cushion for losses.

Should long-term investors use take profit orders?

Long-term investors generally avoid take profit orders as they limit upside potential from extended trends. These orders are better suited for short-term traders and swing traders capitalizing on specific price movements.