What is a Take Profit order and how effectively take profit from a trade

Do you want to know more about forex orders and how they work? Watch our latest video to find out what is a take profit order and how to effectively use it in your everyday trading.

What is a Take Profit Order A simple but effective guide

Ultimately, the way you make money trading markets is to take profit out of them. With this being the case, taking profit from a trade is without a doubt the most important thing you can learn. There are a lot of different theories on taking profit, and sometimes you would even hear the phrase “Nobody ever went broke taking profit.” To be honest, that’s isn’t true at all.

The reason of course is that you need to make as much profit as possible from each trade in order to come out ahead in the end. After all, not all trades will produce profits to you need to make sure that your winners are bigger than your losers. Obviously, if you can take 10 times the profit on a trade that you take on a typical loss, you don’t have to be correct that often in to make a decent return. While that is an extreme example, it gives you an idea of how important taking profit is, and most importantly not to do it too early.

On the other hand, you don’t want to give away too much in profit by being a greedy trader. After all, when you get your signal to get out of the market, you need to get out. No trading system of any strength is going to ignore exit signals. However, many of them do and that is one of the biggest disservices that is done to traders on the whole. You simply must have a signal to get out of a trade in take profits. Having said that, there are a lot of different ways to do it, and you will have to experiment.

Sometimes, it’s a matter of failure to make a “higher high” in the case of a long position, or a “lower low” in the case of a short position. That can be reason enough to get out of a trade. On the other hand, some traders will use moving averages to let them know when the market has run out of momentum in that particular direction. Other times, traders will use Fibonacci extensions or retracement. In other words, there’s a million ways to exit the market, but make sure the you have some rules in place to facilitate when it’s time to leave.