A take-profit order is a type of attached order that automatically closes an open trade when the market price reaches a specified level. This order is typically used by traders to lock in profits and attempt to capitalise on favourable price movements without the need to constantly monitor their positions.
Here's how a take-profit order works:
1. When you have an open trade, either a long (buy) or short (sell) position, you can set a specific price level at which you want to secure your profits.
2. For example, if you are holding a long position for a stock, such as company XYZ, at a price of 109.58, and you want to ensure you take your profit when the price reaches 110.00, you can set 110.00 as your take-profit level.
3. Once the market price of company XYZ reaches 110.00, the take-profit order becomes active, and the trade is automatically closed by the trading system. Your profit is then secured, and the position is no longer exposed to further price fluctuations.
Please note, for a long position, the take-profit will be triggered if the ‘Bid’ price (ie sell price) is reached. For short positions, a take-profit is triggered by the ‘Ask’ price (ie buy price). You can change the settings on the chart to display the appropriate price to your position.