Take-profit

Suppose a trader buys a share for $100 and its price rises to $110. The position is showing a $10 profit, but the share has not been sold yet. If price falls back to $100, that profit disappears. To complete the trade with a profit, the trader must sell the share.

Instead of watching the chart and selling manually, the trader can set a take-profit at $110. If price reaches $110, the order automatically sells the share and closes the position.

This chart keeps the $100 entry and $95 stop-loss from the previous chapter. Use the controls beside the chart to set the take-profit at $110.

The difference between the $100 entry and the $110 take-profit is the potential reward per share.

With ten shares, the $10 potential reward applies to each share. The total potential reward is therefore $100. This reward remains potential because price may not reach the $110 take-profit.

The entry, stop-loss, and take-profit now define the complete position plan. The next chapter shows how these three levels appear together on the chart.