What Is a Take Profit?

A take profit is an order that closes your position automatically once the price reaches a set level in your favour, locking in the gain. In a forex signal, “TP” is the provider’s target, and many signals list several (TP1, TP2, TP3).

How it works

A take profit is a limit order: it closes the trade at the target price or better. For a buy position it sits above the entry; for a sell position, below.

Signal	Entry	Stop loss	Take profit
Buy GBP/USD	1.2650	1.2610 (40 pips)	1.2730 (80 pips)

At one standard lot, where a pip on GBP/USD is worth $10, this trade risks $400 to make $800. Because a take profit is a limit order, it does not suffer the adverse slippage a stop can, but if the price only touches the level briefly, the order may not fill.

A long position’s take profit is triggered by the bid price. If the ask touches your target but the bid does not, the trade stays open.

Why the target matters

The distance to the take profit, compared with the distance to the stop loss, sets the trade’s risk-reward ratio. That ratio and the win rate are linked:

• Close targets are hit more often, producing a high win rate but small wins.
• Distant targets are hit less often, with fewer but larger wins.

Neither is better on its own. What matters is whether wins times their size outweigh losses times theirs, after costs. A service advertising a 90% win rate with close targets and wide stops can still lose money. See why win rate is misleading.

Multiple targets

Signals often list TP1, TP2 and TP3 at increasing distances. Followers are usually told to close part of the position at each one, or to move the stop to the entry after TP1.

That can be sensible, but it also lets a provider report flexible results. A trade that hits TP1 and then reverses to the stop can be presented as a “win” in a results channel, even if a follower who held the full position for TP3 lost money. Ask how a provider counts partial exits before trusting its statistics. See how to verify a signal track record.

What to watch for

• Targets moved after entry. Moving a take profit further away turns the original plan into a different trade.
• Targets inside the spread. A target only a few pips from entry may be mostly consumed by the spread.
• Results counted at the target, not the fill. Your actual exit depends on your broker’s prices.

Related: What Is a Stop Loss? · What Is the Risk-Reward Ratio? · How to Read a Forex Signal