Take-profit in gold trading
A take-profit is an order that closes a gold position at a chosen target price, locking in the gain without the trader having to be at the screen.
Also called TP, Profit target
A take-profit is a pending order that closes a position when price reaches a target. For a long it is a sell limit above entry; for a short, a buy limit below. Because it is a limit order it fills at the target or better and does not suffer adverse slippage. Many traders set the take-profit and stop-loss together when opening a trade, which fixes the reward-to-risk ratio in advance.
How it applies to gold trading
Suppose a trader buys gold at 4,000 with a stop at 3,992 ($8 risk) and a take-profit at 4,020 ($20 reward). The trade is 2.5R: it risks $8 to make $20. With a 40% win rate that is a positive expectancy; with the same win rate and a 1:1 target it would be negative after costs. Target placement therefore matters as much as entry.
Targets are usually placed just before an obvious level rather than at it: a few dollars below a prior high, or at the near edge of a resistance zone, because price often reverses before touching the exact figure that everyone is watching. Partial take-profits, closing part of the position at a first target, are easy on gold because of 0.01-lot steps.
A common mistake
Setting the take-profit by the amount of money wanted rather than by where price is likely to stall. A $50 target in a $20-range day is a hope, not a plan.
See also: Stop-loss, R multiple, Risk-reward ratio, Support and resistance.
Frequently asked questions
Should I always use a take-profit on gold?
Not necessarily. Some methods trail a stop instead of fixing a target. What matters is deciding the exit rule before entry and following it.
Can a take-profit fill at a better price?
Yes. It is a limit order, so a gap through the target fills at the better price. It cannot fill worse than the target.