Take-Profit
A take-profit order closes a position automatically when price reaches a defined profit target – the counterpart to the stop-loss. Together both define a trade's risk-reward ratio in advance. Sensible targets sit at objective market structures (resistance zones, prior highs, measured moves), not at wished-for amounts – and the choice between a fixed target and trailing decides whether you optimise consistency or trend capture.
Context & Mechanics
Definition and purpose
The take-profit order (TP) is a limit order at the profit target: above the entry for longs, below for shorts. It does two jobs: it locks in profits without the trader sitting at the screen, and it forces planning – anyone setting the TP before entry has made target, stop and thus the risk-reward ratio explicit. A trade with a $1 stop distance and a $3 target distance is a planned 3R trade; whether it is worthwhile depends on the hit rate (expectancy).
Determining targets
Viable targets come from market structure, not from account wishes: resistance and support zones, prior highs/lows, measured moves from patterns (e.g. range height projected onto the breakout) or volatility measures like ATR multiples. The order of operations is decisive: first check whether the market leaves enough room to the next obstacle for ≥2R – if not, the target is not too far, the setup is too weak.
Fixed targets vs. trailing
The fixed target maximises consistency: high plannability, clean statistics, no giving back of unrealised profits – but trends run on without you. The trailing stop maximises trend capture – but gives back part on every normal pullback. A common middle way: partial profit at the first target (e.g. half the position at 1.5–2R), the rest via trailing – psychologically the easiest to sustain, statistically rarely optimal but robust. What matters is less the variant than its consistent, backtested application.
Why it matters for traders
Without a defined target there is no plannable R-multiple – and without an R-multiple no evaluable strategy. In the GlanWick simulator, target and trailing variants can be compared by way of example without real capital – GlanWick is a training and simulation tool and not a prop firm itself.
Execution Example
A stock breaks upwards out of a six-week range between $44 and $48. A trader (risk 1R = $400) buys the retest at $48.20, stop below the range top at $47.40.
- Measured move: range height of $4.00 projected onto the breakout → price target $52.00. Stop distance $0.80 → planned risk-reward ratio (52.00 − 48.20) ÷ 0.80 = 4.75R.
- Position size: $400 ÷ $0.80 = 500 shares; a take-profit order for 500 shares at $52.00 is placed together with the stop (bracket order).
- Partial-profit variant: alternatively sell 250 shares at $50.00 (≈2.3R), move the stop to entry, let the rest run to the measured target.
- Evaluation: if price reaches $52.00, the full variant realises +$1,900 (4.75R); the partial-profit variant about +$1,400 – but with profit secured earlier and zero remaining risk after the first partial sale.
Execution Risk & Errors
Deriving targets from wished-for amounts instead of market structure
Moving the take-profit ever higher in running trades until the profit is gone again
Entering trades with less than 1.5–2R target potential because “the setup looks good”
Cancelling the order at the target and letting it run out of greed – without a trailing rule
Taking partial profits so early that the strategy's residual statistics turn negative
Frequently Asked
Where do I set my profit target?
At objective structures: resistance/support zones, prior highs or lows, measured moves from patterns or ATR multiples. Only then check whether the ratio to the stop distance yields at least about 2R – otherwise discard the setup.
Take-profit or trailing stop – which is better?
Fixed targets deliver consistency and clean statistics, trailing captures trends – but gives some back on pullbacks. Many combine both via partial profits. What matters is backtesting one variant and applying it consistently.
What is a bracket order?
An order combination that automatically places stop-loss and take-profit with the entry – often linked as OCO: if one side executes, the other cancels. That way every trade is fully protected and planned from second one.
Why should the target be at least 2R away?
As a rule of thumb: at 2R a hit rate of just over 33% suffices to be profitable; at 1R you need over 50% plus costs. Generous R-multiples provide error tolerance – the exact threshold comes from your own expectancy calculation.