A take-profit is a predefined exit price at which a position is closed to lock in a planned gain. It is set before the trade and closes the position at that price regardless of what happens afterward.
How it works
A take-profit is set as a fixed distance from entry before the trade is placed.
It is simple and consistent: the outcome does not depend on how the trade feels when price approaches the target.
Why it matters
A take-profit caps the gain. If price keeps running far beyond the target, the extra move is simply not captured.
Moving the target further away because the move 'feels like it has more room' replaces a pre-decided rule with a reaction.
A simple market example
A trader enters at $50 and sets a take-profit at $55. Price reaches $55 and the position closes. Price then continues to $60, but the trade is already done at the target.
Common mistakes
Moving the take-profit further away mid-trade because the move feels extended, which turns a rule into an improvisation.
Judging a take-profit strategy on a single trade that ran beyond the target.
Frequently asked questions
Is a take-profit the same as a profit target?
It is one way to implement a profit target: a fixed price at which the position closes.
Why does it sometimes feel too early?
Because it caps the gain. An extended move past the target is the tradeoff a fixed take-profit accepts.
Can I combine it with a trailing stop?
Yes. A common hybrid takes partial profit at a take-profit and trails the rest.
Educational content only. Definitions describe common market usage and may vary by jurisdiction, instrument, or institution.