A take-profit is an order that automatically closes a position once price reaches a predefined target, securing the gain without further decision-making. Paired with a stop-loss, it fixes the trade’s risk-reward ratio at entry: target distance divided by stop distance.
Its job is as much psychological as mechanical. Exits are where discretion does the most damage — taking profits early out of fear or holding past the target out of greed both degrade a strategy’s measured edge. A pre-committed target makes the exit a rule, which also makes the strategy testable: a backtest can only evaluate exits that are defined.
Common variants include partial take-profits (closing a fraction at the first target and letting the rest run), and trailing approaches that replace the fixed target with a stop that follows price. Each variant changes the win rate and average win together, so they should be compared on expectancy over a sample, not on how single trades feel.