A take-profit order is used to close a position automatically if your goal for the trade has been reached. This can help secure gains and make sure not to lose them.
When you place a take-profit order, you determine a price at which you wish to sell the position to secure a predetermined potential gain. If the market reaches the price, the position will be sold automatically, and the gains are secured.
- Characteristics of take-profit orders
- How take-profit orders work
- Example of a take-profit order
- Advantages and disadvantages of take-profit orders
- How can I place a take-profit order?
- Why can't I place a take-profit order using SaxoInvestor?
Characteristics of take-profit orders
- Price target: You set a specific price at which you want to close a position to secure profits. The order is executed automatically once this price is reached.
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Automatic execution: The orders are executed without the need for manual intervention, allowing you to secure gains even if you are not actively monitoring the market.
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Emotional discipline: By setting a predefined exit point, take-profit orders can help you avoid the temptation to hold positions too long in hopes of higher gains, thus maintaining emotional discipline.
How take-profit orders work
Take-profit orders automatically close a position when the market price hits a specified target set by you. For long positions, this target is above the current price. For short positions, it's below. Once triggered, the order executes, securing profits at the specified price or better, given sufficient liquidity, without needing constant market monitoring.
Example of a take-profit orderSuppose you own shares of Company XYZ, currently trading at USD 100 per share. You believe the stock has the potential to rise to USD 110, where you would like to secure your profits. Therefore, you set a take-profit order at USD 110. Scenario 1 The following week, the stock price reaches USD 110 and your order is triggered. Your shares are sold at USD 110 or better, locking in your gains. Scenario 2 The price of the stock never reaches USD 110 and your position remains open. |
Advantages and disadvantages of take-profit orders
Advantages
- Profit realisation: Take-profit orders automatically lock in profits when the target price is reached, ensuring gains are secured.
- Reduced monitoring: You do not need to constantly watch the market, as the order executes automatically.
- Emotional control: Take-profit orders can help maintain discipline by preventing you from holding positions too long in hopes of higher profits.
Disadvantages
- Missed opportunities: If the market continues to move favourably beyond the take-profit level, you may miss out on additional gains.
- Liquidity dependence: Execution at the desired price depends on market liquidity; in thin markets, the order may be only partially filled.
Read also: What is a stop-limit order? and What is a trailing stop order?
How can I place a take-profit order?
To add a take-profit order to a trade ticket, click Add Take profit / Stop loss > Click Take profit > Choose a Unit (e.g. Price) > Determine your preferred take-profit level at which you want to sell automatically. Take-profit can be added to both new and existing positions.
Units: You can place take-profit order using different units. You can choose between percent, price, ticks, and DKK (account currency).
SaxoTrader
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New positions:
- On the Trade Ticket > Click Add Take Profit / Stop Loss >Next to "Take Profit" choose your take-profit price > Click Place Order
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Existing positions:
- 1. Go to the Positions module > Click Add under "Limit" > Next to "Take Profit" choose your take-profit price > Click Place Order
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- 2. Go to the Positions module > Right-click on a position > Click Take Profit / Stop Loss > Next to "Take Profit" choose your take-profit price > Click Place Order
Why can't I place a take-profit order using SaxoInvestor?
On SaxoInvestor, you can only add take-profit or stop-loss orders to existing positions.