Take-Profit Order
An order to sell an asset when it reaches a certain price, used to lock in profits.
What Is a Take-Profit Order?
Take-profit order is a type of order placed with a broker to automatically sell a security when it reaches a specified price, locking in profits once that target price is hit. It’s used by traders to ensure they exit a trade at a profitable point without needing to monitor the market constantly.
How It Works
- A take-profit order is set at a price above (for long positions) or below (for short positions) the current market price.
- When the price reaches or surpasses the set target, the order is triggered, and the position is closed automatically.
- It helps traders secure profits by setting a predefined exit point.
Example
- Suppose you buy Bitcoin at $28,000 and set a take-profit order at $30,000. If Bitcoin’s price rises to $30,000, your take-profit order will automatically sell your position, securing a profit of $2,000 per Bitcoin.
Why It Matters
- Take-profit orders remove emotion from the trading process by enforcing pre-determined exit points.
- They allow traders to lock in profits without having to constantly monitor market movements.
The Sum Up
In short, a take-profit order is a safety net that ensures you don’t miss out on profits when the price hits a set level, making it easier to exit a trade at a favorable price.