Risk and psychology
Take profit
Definition
A take profit is the price at which you plan to exit a winning trade, usually at the next support or resistance level. Setting it before entry keeps you from closing too early out of fear or holding too long out of hope.
Example
Say you buy at $40.00 with a stop at $39.00, and the next resistance is at $42.50. A take profit at $42.40, just below that level, aims for $2.40 a share against $1.00 of risk. Set in advance, it keeps you from grabbing $0.50 on the first wobble or holding out for $45 while price stalls at resistance.
Hypothetical numbers, for illustration only.
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