What Are Take-Profit and Stop-Loss?

Take-profit and stop-loss (TP/SL) are trading strategies where you set one price to exit a trade with profit (take-profit) and another to limit potential losses (stop-loss). This approach allows you to apply momentum trading or cap your losses in volatile markets by closing trades to manage risk and lock in gains.

You can define a price trigger and a value to control losses and mitigate risk. Once the asset hits your preset price trigger—either for capturing profit (take-profit) or limiting loss (stop-loss)—your order is submitted automatically.

There are two types of TP/SL orders: stop and trigger. The main difference is that trigger orders do not freeze your margin or positions.

Why Use TP/SL?

Take-profit and stop-loss are powerful trading tools. If prices move against you and losses begin, timely loss limits prevent further damage. When prices move in your favor, take-profit lets you secure your gains. Take-profit and stop-loss are among the most critical tactics for managing risk effectively throughout your trading journey.

What Should You Consider When Setting TP/SL?

Consider these key factors when setting TP/SL:

1. If the market price doesn't reach the trigger, the order won't be submitted.

2. If the order executes, your existing position will close or a new position will open according to your TP/SL settings. If the order doesn't execute, your position and margin remain unchanged.

3. If the trigger condition is met and the order is created with your specified price—activating the price limit rule—the system submits the order at the highest or lowest available limit price at that moment.

When Are TP/SL Orders Not Filled?

TP/SL orders may not execute in these scenarios:

1. If your TP/SL position value exceeds the maximum limit, the order won't execute.

2. During sharp market swings, TP/SL orders might not fill instantly because they use the market price once the trigger activates. To close all positions quickly, select your position and click Close All.

3. If your order list contains opposite-direction orders (except reduce-only), they might open a new position after your TP/SL triggers. At that point, margin checks may fail and cause your TP/SL order to be canceled.

Conclusion

Take-profit and stop-loss are essential risk management tools for trading. They help traders automate profit-taking and loss-limiting, which is especially valuable in volatile markets. However, understanding how these orders function and knowing what to consider when setting them is crucial. Using TP/SL correctly can significantly strengthen your trading strategy and help you achieve more consistent results.

FAQ

How Should You Set a Take-Profit?

Set your take-profit 10-20% above your entry price. Take into account the asset’s volatility and market trends. Use technical analysis to identify major resistance levels.

What Is Take-Profit in Trading?

Take-profit is a preset price level at which a trader’s profitable position closes automatically, securing gains and limiting risk.

How Does a Take-Profit Order Work?

A take-profit order closes your position automatically when the price reaches your target profit level. This helps lock in gains and control risk when trading cryptocurrencies.