What is a Take Profit Order
A take profit order is an order that is used by forex traders to specify the actual rate or number of pips from the point of the current price to the point where the current position could be closed at a profit. It is the level where a forex trader chooses to take a profit.
A pip is the smallest variation which can take place in a given trade. It s usually 0.0001 for EUR/USD and for most other pairs of currencies that can be traded. The value of 1 pip can be calculated for a given trade simply by multiplying $100,000 by 0.0001 and seeing that the smallest variation gives a profit or loss of $10.
In the forex trading business, ‘take profit’, ‘stop loss’ and ‘trailing stop’ are three terms that are commonly used. These terms are the most preferred type among limit orders used to exit transactions under specific circumstances. They allow the trader to reduce exposure to risk to the barest minimum as well as have more composure while trading.