This is usually an order that is used by investors or currency traders whereby they specify the exact rate or number of pips from the current entry price where they would like to close out their current position for a profit. Please note the difference between stop-loss and take-profit. For take-profit, the trade closes with a profit.
The currency rate at which is deemed to be the level where the investor/trader wants to take a profit is sometimes referred to as the "take-profit point".
Look at the name, take-profit are normally used to lock in an investor/trader's profit in the event of favourable move. If the investor/trader is in a short position, you believe that the price will fall to a certain level, but you are unsure how the currency will behave beyond that level. By placing a take-profit order at that point will automatically close out your position allowing you to lock in all your profit.
Short 0.1 Lot of AUDJPY at 78.45. Place a take-profit at 78.00. When the price falls to 78.00, the trade will close automatically and will generate a profit of USD45.00.
Risk to Reward ratio coming up next.......
Anyway I am currently Long AUDJPY @ 78.35 and I am currently at -68 pips.... Oh!.... anyway out............... Hey ! Don't worry, I follow the money management policy.
Look out for my next post.
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