What is a take-profit order?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 3 min
In short
A take-profit order closes a position automatically once the price reaches a level you set in advance. It works while you are away from the screen, but only fires if that level is actually reached. It is commonly paired with a stop-loss on the other side.
Key points
- Closes the position automatically at a chosen level
- If the level is never reached, nothing happens
- Often paired with a stop-loss on the opposite side
- A thin book may fill only part of the order
Definition
An order attached to an open position that closes it when the price reaches a specified level on the profitable side.
The classic setup: you bought bitcoin at 4,000,000 yen and rest a sell at 4,500,000. If the price reaches that level the position closes automatically and later moves no longer affect you. If it never gets there, the order simply stays on the book.
Because a take-profit usually rests as an ordinary limit order, touching the price does not guarantee a full fill. Orders queued ahead of yours are served first, so if little trades at that level you may get a partial fill with the remainder still resting.
When pairing it with a stop-loss, an OCO order is the usual tool, since it cancels one leg when the other fills. Submitted separately, the surviving leg can execute after the position is already closed and open an unintended new one.
Watch out for
- · Reaching the price does not guarantee a full fill when the book is thin
- · Placed separately from a stop-loss, the leftover leg can open a new position after the first one closes
- · Order lifetimes differ by exchange, and some are cancelled automatically when they expire