GLOSSARY // Risk & Psychology
Take Profit
A take profit is a resting order, usually a limit order, that closes a winning position automatically at a predetermined target price. Paired with a stop loss, it brackets the trade so both exits are decided before emotions get a vote.
The target should come from structure — a prior resistance level, a measured move, a multiple of the risk — not from a dollar amount the trader wants to make. Some traders scale out instead of exiting all at once: sell half at the first target, move the stop to breakeven, and let the rest run.
Long at $80.00 with a stop at $77.00 ($3 risk), a trader sets a take profit at $89.00 ($9 reward) for a 1:3 trade. The stock hits $88.90 and reverses; the limit never fills and the trade fades back to $84. Scaling out half at $86 (2R on that half) would have banked part of the move — the tradeoff between full targets and partial exits in one trade.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.