Take-Profit Order - T/P

Long-term investors usually invest Buffett-style, not touching investments even when security prices drop. For those wanting to cash out soon as a short-term trader, the take-profit order (T/P) is the way to go.

A take-profit order is a limit order, which means the securities will be sold at the trigger price set by the security holder for the gains. For example, Barnaby Jones might set a take-profit order for when his stock reaches $300 per order. The stock has been hovering around the $290-$295 range for a while...and eventually, it hits $300. His limit order will cash him out at this point, even if the stock keeps rising afterwards.

Take-profit orders are often used with stop-loss (S/L) orders. If T/P orders are the upper bound, S/L orders are the lower bound. Say Barnaby sets his T/P to $300 and his S/L to $250. As soon as the stock dipped to $250, this would trigger his stocks to be cashed out.

S/L and T/P orders can help short-term traders manage their risk, getting traders out of the game while they’re ahead. Traders might set T/P orders based on technical analysis, and/or based on their profit goals.