What is Take Profit or TP

A take-profit order is an act of selling cryptocurrency to secure profits. It is usually executed at a predetermined price when the trade is in profit.

Taking profits requires fairly active participation in the markets and is different from the HODL strategy which requires the trader to keep passively investing in their assets.

For example, the trader may enter a swing trade and buy a cryptocurrency at a low price. The cryptocurrency appreciates as anticipated, and the trader sells it for a profit. However, they may also have a predetermined level, where they want to take profit. So, for instance, if a trader buys a coin at $1, they may set a take-profit order at $1.4 for a 40% profit. A take-profit order is often combined with a stop-loss, where the trader caps their downside by setting an order at a price where they want to exit the trade for a loss. 

In our example, they may set a stop-loss order at $0.8. That would give the trader a 1:2 risk-reward ratio. In other words, they would have to close this trade profitably more often than one in three times to make a profit.

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