5 min reading
Learn more about the risk management: Take profit
The main goal of every trader is to get the most profit and not to go into losses on such an unpredictable crypto-currency market. If you are a newbie, the crypto-currency market may confuse you at first, but such tools as “stop loss” and “take profit” will come to the rescue and make your trading a bit easier. In the article, we will give you an explanation of what profit order is and how to set it properly.
What is take profit?
Take profit order plays a key role in various trading strategies with a variety of assets: from stocks to crypto-currencies. When prices rise and the last traded price reaches the profit price, the orders serve as an upper limit and ensure that assets are sold before prices start to fall again. Therefore, take profit allows you to close a position when the price changes in your favor and to set a target profit. You can also use take profit orders to open a position. The main task of orders is to control trading when the user is away.
For example, if the user cannot constantly monitor the market, such a function as take profit is quite useful and even irreplaceable. Indeed, in the absence of a trader, the market can turn suddenly and go in the opposite direction, and in a short time a profitable trade turns out to be loss-making. Stop loss will help keep losses to a minimum in such a situation. The opposite is also true: if at some point a strong movement brings a deal into a good profit, take profit will help fix it before a rollback occurs in the opposite direction. Do you want to learn more about stop loss? Read the educational article here.
Advantages of take profit order
Moreover, the advantage of take profit order does not allow emotions to get control over you when the market trades intensively and rapid fluctuations take place. Opening a trade, choose the price when you close the position without stress, instead of succumbing to emotion and selling assets hasty. Using take profit order, traders do not need to sell the cryptocurrencies manually and constantly monitor price rates throughout the day.
Though take profit is quite a precise tool, it is possible that the order will be filled but price rates will keep growing. As a result, the trader may skip potential gains. However, everyone can make a mistake, so before setting the take profit orders be sure that the settings are correct. In the case of cryptocurrencies, the wrong order setting can be costly for the trader.
However, it is important to note that use key support and resistance levels to correctly determine price targets. According to the studies, it is recommended to set the take profit target at the mark that defines the nearest resistance level or close to it. As no one guarantees you that the price will continue to rise above the key level. However, following these simple rules will allow you to get your profits on time, avoiding unnecessary stress, and understand the basic principles of risk management.