When to Use a Take-Profit Order

Focus: FOREX

The reverse of a stop-loss order is the take-profit order, and Christopher Lewis of Forex.com offers tips on its best use.

When forex traders place their trades, the majority of them have no idea what their final destination is as far as price. Because of this, there is a certain set of situations that dictate whether or not you may want to place a take-profit order when trading forex.

One of the most common reasons to place a take-profit order is that you expect the market to put up a fight against your position at a certain area. For example, you may find that there is a massive resistance area up ahead on your buy order that will more than likely give you trouble. When you can clearly identify this, you may want to put in a take-profit order.

One of the biggest determining factors of whether or not you might place one of these orders is if you are trading with the overall trend or against it. If you are trading with the long-term trend, a take-profit order may not be wise as it will possibly cut profits before the move is over. In fact, when trading with the trend-the wisest choice is to let the trade run as far as you can. If you are taking profits at a particular level, you are prohibiting the trade's full potential.

If you are trading against the trend, a take-profit order makes perfect sense as the prevailing trend tends to hold up over time.