Metatrader Overview. Take Profit

Standard Take Profit

Two types of Take Profit have to be distinguished. The first type is automatic, the second is or manual.

Let’s look at the automatic Take Profit. It is activated as follows: an order is opened and value of Take Profit is being set as an absolute value higher than opening price. In case if the Take Profit level is reached, the order is closed automatically.
Let us look at an example.

Ask price=1.4040, Bid=1.4038. We open a BUY order. Open price is 1.4040. Let’s set the Take Profit value=1.4060. The price starts to move up and reaches Ask value=1.4060, but the order is not closed as the BUY order will be closed as per the Bid level. The price keeps on going up and passes the Bid level=1.4060. The order is closed automatically. The profit is 20 pips.

The similar for SELL order. Ask price=1.4040, Bid=1.4038. We open a SELL order. Open price is 1.4038. Let’s set the Take Profit value=1.4018. Price is going down and passes the Ask level=1.4018. The order is closed automatically. The profit is 20 pips.

One of the features of Take Profit is that it cannot be set too close to the order opening price. Minimal distance can be different and is being set according to configurations of the broker server. Value is counted from the closing price. I.e. from the Bid price for BUY orders and from the Ask price for SELL orders.
During the time when the order is open, we are able to change the Take Profit value. Herein, rules for distance of a new Take Profit value are exactly the same as during the order opening. The only difference will be that current price value has to be used but not the order open price.

For convenience, the traders use relative values of Take Profit in the pips, e.g., for the value of TP=25 at current price of Bid=1.4038 and Ask=1.4040, absolute value of Take Profit for BUY order will be 1.4065, and for SELL order under the same conditions it will be – 1.4013. I.e., Ask price is taken as a basis for the BUY order and Bid price is taken for the SELL order. In this manner, when closing an order on Take Profit event we will receive precisely 25 pips of profit.

Manual Take Profit.

Manual method of order closing differs from the automatic one in the way that in case of reaching Take Profit level, the order is not closed automatically, and it has to be closed manually. Such method is not very effective because additional efforts are required, but there are cases when it is reasonable to use particularly manual closing. E.g. when we need to use a function of partial closure of an order under different levels of profit for one and the same order.

Let’s take a look at an example. We open an order with 3 lots volume. And we will close one lot at a different level of profit. TP1=10, TP2=20, TP3=30. When reaching TP1 and TP2 parts of the order will be closed manually and closing of the part at the TP3 level will be done automatically. 

With the Ask=1.4040, Bid price =1.4038 the parameters for BUY order will be as follows: open price=1.4040, manual Take Profit TP1=1.4050, manual Take Profit =TP2=1.4060, standard Take Profit=TP3=1.4070.

With the Ask=1.4070, Bid price =1.4068 the parameters for SELL order will be as follows: open price=1.4068, manual Take Profit TP1=1.4058, manual Take Profit =TP2=1.4048, standard Take Profit=TP3=1.4038.

Manual method of order closing as per the Take Profit level has one disadvantage minimum. If a technical deficiency suddenly occurs on the trader side, then it would be impossible to close the order timely at least. In automatic method, order will close in any case regardless of technical state of the metatrader terminal. Thus, trader is responsible for manual order closing, and broker is responsible for the automatic closing. These peculiarities have to be obligatory taken into account when choosing parameters for the order being opened.