Give More Control over Risk Management with Take Profit strategy

One of the most important risk management tools used by crypto traders on a daily basis is Take Profit order. We all know that there is no magic formula to time the market but there are some strategies which a trader can use to maximize his gains. A thorough understanding of using strategies and features like Take Profit, stop-loss or other order types is fundamental for a trader to place the most successful trades.

If you are a beginner, it’s important to know how to exit a trade profitably. Every trade which you place required an exit strategy. And, the whole point of trading is to exit any trade with profit.

Now the question is how to exit a trade successfully? And, the best and the easiest tool which you can use is take profit order. Let’s understand about this order type in deep:

Take Profit (T/P) order

This type of order mentions the specific price at which a trader should close an open position for a profit. Most traders employ take profit order combined with stop loss orders so as to manage their open positions.

A T/P order is an automatic exit strategy based on the profit and loss calculation rather than an emotional decision to sell or hold any asset. Placing a take profit order requires a technical analysis of the likely moments of market. Additionally, this order type is quite useful if you are a trader with short-term strategy or who wants to enjoy the benefits of the sudden rise in the price of asset.

Generally, T/P is a value which the trader chooses as the appropriate amount in case the trade moves in the favor of a trader. If that particular level of profit is reached, once the T/P order is triggered, the trade will be closed automatically. It’s a kind of pending order that locks in the trader’s profit automatically and lets traders earn immediate profits.

How T/P order works?

Let’s say a trader buys XYZ at $5,000, and puts take profit +10% which means, he has created an order to sell BTC at a price of $5,500.

For some time, BTC has traded within the range of $5,000, and then continued to grow. Upon reaching $5,500 or above, your pending order with take profit +10% will be filled, and the system will close the trade as a sell order.

Here your total profit comes out as $500.

So, Take Profit order is a type of pending order which a trader can use to close a profitable position once it reaches the specified price.

Another example:

Suppose a trader goes long i.e. he is entering a buy position by placing a trade at 1.2880, expecting the price to reach higher. Now, he wants to benefit from the rising market trend. So, here he places a Take Profit order at a level higher than his entry price, say at 13.280. If the asset price hits the predefined Take Profit price, the position will be closed and the profits are locked in.

On the other side, if the trader enters a sell position expecting that the prices for the asset will fall in future, he places a Take Profit order at a lower level from the entry price. Let’s say, he has entered the market at the same price 12.880. Now, he decides to place a Take profit order at 12.580. If the stock price hits the level of 12.580, the position is closed.

Placing T/P order with trading bot

Automating profit targets and stop-losses is a key feature of the automatic crypto trading platform. Making use of crypto trading bots is an effective way to manage your positions. Let’s understand how Take Profit order works with trading bot:

A T/P order is designed for the purpose to manage risks where the system stops the bot and sells the base currency used by the trader in open orders as soon as the specified T/P conditions are met. Once the bot reaches a specified percentage that you set in the T/P parameter, it stops trading by selling all the base currency.

To activate T/P, you have to toggle the T/P option and enter the % value.

Example:

Suppose, you have an active bot trading on ETH/USDT, and you set the Take profit at 15%. As soon as Current Funds (In USDT) becomes +15%, the bot will close all the orders automatically, and sell the remaining ETH.

Why should you trade with a take-profit order?

While no one can predict accurately which trades are winning before entering them, we are more likely to make an overall profit by making use of take profit orders if the winning trades outnumber the losing trades throughout several trades.

The advantage of using T/P order is that the trader is not required to execute a trade manually. On the other side, this order type is executed at the best available price. So the take profit order is risk minimizing, profit taking, and preventing second-guessing. If the trade is closed, you will surely make some money on the trade.

While setting a take profit order, one should consider risk/reward ratio which shows how much profit the trader expects in an exchange for the risk of a limited loss.

The best crypto trading platforms like TrailingCrypto, cryptohopper, etc. allows its traders to test and automate any trading scenario while using a simple and intuitive interface. Choose the trading strategy that you wish and these platforms will automate your trades by making use of bots. These platforms have their own crypto trading bots to watch the market 24x7 and place trades automatically as per your defined strategy to earn profits.

Aim of Trailingcrypto is to Provide a Unified Trading Platform to enable user to do trading on multiple cryptocurrency exchanges from single platform. We provide many Advance Order types which is natively not available on all exchanges.