What is a Take Profit?

    Today we cover another important feature on any trading platform. We are talking about the take profit feature. Hopefully, you are here today to learn more about it. And by the end of this article we can expect you to place a take profit on all your trades.

    In case you may have missed it, you may jump to our discussion on stop losses here. 

    A take profit is a feature that is on almost all platforms that will close your trade at a profit when the price reaches a certain level. For example, you enter a trade, and based on your analysis you believe the price will go up 50 pips. You place your take profit at the price that reflects 50 pips and when the price reaches there, your trade will automatically close.

    Such a vital tool that is not used as much as it should be. Please make sure you are using it to protect yourself from any uncertainty in the market.

    take profit displayed over trending market and graph with baxia logo

    Why Is It Important to Use a Take Profit Order?

    The key reason why take profits are particularly important is that it allows you to not be stuck in front of your trading account all day. It allows you to take a break or let your trade play out as you imagined it would. Once it has reached your target level, the trade will close automatically, and the profit will be added to your trading account.

    Another reason why take profits are important is because it prevents greed. As we know, greed could be very detrimental to your trading. A bad habit traders will find themselves doing goes like this; they enter a trade, place a take profit at 20 pips, when trade is up 15 pips they move the take profit to 30 pips in hopes they will profit more. This is not a good strategy and is more likely to fail than be successful.

    Keep Learning and Maintain Your Trading Focus

    If you are doing the proper analysis before entering a trade, the take profit you are placing should be . If it so happens that you placed a 20 pip take profit and the price moved 40 pips in the direction you thought it would, you shouldn’t be upset that you missed out on an extra 20 pips. You should be happy you profited the 20 pips your analysis expected you to make. As for the extra 20 pips, you can go back and revisit your analysis and figure out why you did not expect it to go 40 pips. These are the times where you are learning and improving your overall trading.

    If you let your emotions get the best of you, then on the next trade you will likely move the take profit, and instead of the price going the extra 20 pips, it could reverse on you and you end up with a 10 pip loss. This kind of mentality differentiates the best traders from the rest of the pack.

    To conclude, the take profit feature is one that all traders should be using. The more you use it and the more you are successful at using it, the better you will become at trading.

    Download your Baxia Markets demo account today and place some trades. Please make sure you are using your take profits and see how it plays out for you. We would love to hear from you soon and hopefully further this discussion.

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