What is take profit order?
Take Profit orders are used to set a target profit price on an unleveraged spot trade or a leveraged long or short position. The profit price is to be set in terms of absolute price. As with Stop orders, Take Profit orders can also be used to open positions. Take Profit Triggers the next order type when the last market price hits the stop price. Next order can be Market Sell, Limit Sell or Trailing Stop Sell.
Take Profit explanation as per Investopedia
Most traders use take-profit orders in conjunction with stop-loss orders (S/L) to manage their open positions. If the security rises to the take-profit point, the T/P order is executed and the position is closed for again. If the security falls to the stop-loss point, the S/L order is executed and the position is closed for a loss. The difference between the market price and these two points helps define the trade’s risk-to-reward ratio.
The benefit of using a take-profit order is that the trader doesn’t have to worry about manually executing a trade or second-guessing themselves. On the other hand, take-profit orders are executed at the best possible price regardless of the underlying security’s behavior. The stock could start to breakout higher, but the T/P order might execute at the very beginning of the breakout, resulting in high opportunity costs.
Take-profit orders are often placed at levels that are defined by other forms of technical analysis, including chart pattern analysis and support and resistance levels, or using money management techniques.
How to place Take Profit:
- Select Take Profit order.
- Select Base and Quote coin.
- E.g. Market: BTC/LTC
- Select the number of coins needs to be sold.
- E.g. 10 coins. (quantity could be in the fraction)
- Now, click on the drop-down menu near Take Profit. It will pop up 3 options: Market, Limit, and Trailing. Selection of an option means when market price (bid price) rises to the Stop value, the selected order in the drop-down menu will be executed (Market Sell, Limit Sell or Trailing Sell).
- E.g if the current bid price of LTC is 0.011184 BTC.
- Stop value can be a place at 0.011210, 1% above the current price.
- Suppose market hit 0.011210. This will trigger subsequent order. Below are the possibilities:
- Market Sell: A Market Sell order will be placed.
- Limit Sell: A Limit Sell order will be placed having limit value mentioned during placing the order.
- Trailing Stop Sell: A trailing Stop sell order will be placed with the mentioned offset during placing the order.
*Note: Always make sure the Stop Value is higher than current Bid Price.
A hypothetical example:
- Case 1 Take Profit with Market Sell:
- Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Market Sell order, for 1 NEO coin with a stop value $110. Now when the NEO market bid price hit $110, a Market Sell order will be placed at $110.
- Case 2 Take Profit with Limit Sell:
- Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Limit Sell order, for 1 NEO coin with a stop value $110 and a Limit value $115. Now when the NEO market bid price hit $110, a Limit Sell order will be placed with limit value $115.
- Case 3 Take Profit with Trailing Stop Sell:
- Suppose the current bid price of NEO is $100. Now someone placed a Take Profit with Trailing order, for 1 NEO coin with stop value $110 and Trailing offset 3%. Now when the NEO bid price hit $110, a Trailing Stop Sell order will be placed. Let’s say market hit $120 and then start correcting. When the market bid reaches $116.4, a Market Sell order will be placed.