How to Set a Take-Profit: Targets, Risk/Reward and Partial Exits
A good entry without an exit plan is only half a trade. We cover how to choose your take-profit in advance — at a level, as a multiple of the stop, in parts or with a trailing stop — and calculate how each choice changes the result.
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Where a take-profit starts
The definition and a basic example are in take-profit and stop-loss. The order is: first the stop (how to choose it: where to put a stop-loss), then the target, then the decision — is the trade worth it? If the nearest resistance is closer than your stop distance, the trade is usually skipped.
Four ways to set a target
- At the next level. The target sits just before the nearest resistance (for a long) or support (for a short). The most intuitive method.
- By risk/reward ratio. Target = entry + 2 or 3 times the stop distance. More about the ratio in the glossary: risk/reward.
- In parts. Half the position is closed at the first target, the stop moves to breakeven, and the other half runs to the second target.
- With a trailing stop. There is no fixed target — the stop follows price. Suits a strong trend; details in trailing stop.
How many trades need to be winners
The further the target is from the stop, the lower the win rate you need to break even. Formula: 1 ÷ (1 + R), where R is how many times further the target is than the stop. Excluding fees:
| Risk/reward | Required share of winning trades | Comment |
|---|---|---|
| 1:1 | 50% | Fees quickly push you into the red |
| 1:1.5 | 40% | Minimum for short-term trades |
| 1:2 | ≈33% | A common starting choice |
| 1:3 | 25% | Target further away — gets hit less often |
This does not mean 1:3 is always better. A distant target gets hit less often, so your real win rate drops. You can check your own numbers in the risk/reward calculator.
An example with numbers
Account size: 1,000 USDT, risk 1% (10 USDT). Buy at 100.00, stop at 96.80 (distance 3.20). Position: 10 ÷ 3.20 ≈ 3.1 units, about 312 USDT. The nearest resistance is 106.50.
- Option 1 — a single take-profit. Target 106.30, just before the level: +6.30 per unit, about +19.7 USDT. A ratio of almost 1:2.
- Option 2 — in parts. Half is closed at 103.20 (1R) — about +5 USDT, and the stop on the rest moves to 100.00. The second half closes at 106.30: another +9.8 USDT or so. Total: about +14.8 USDT.
- If price reverses after 103.20: in option 1 the trade closes at the stop, −10 USDT; in option 2 you keep about +5 USDT, and the rest closes at zero.
Partial exits make less on a winning trade, but they turn a winner into a loser less often. The choice depends on your style — what matters is that the rule is written down before you enter. To have the take-profit and stop in place at the same time, an OCO order is handy.
Common mistakes
- Eyeballing a target beyond strong resistance. Price turns earlier and the trade comes back to the stop.
- Closing manually at the first pullback. Winners get cut short, losers run to the stop — and your stats go negative.
- Moving the take-profit further along the way "because it is going up", without a trailing rule.
- Breakeven too early. A normal pullback closes the trade at zero just before the move to the target.
- Forgetting about fees. A 1:1.5 ratio often becomes 1:1.2 after fees.
What you are risking
A take-profit does not make a trade profitable: price may never reach the target and come back to the stop. In a sharp move a limit take-profit may only partly fill, and the stop may fill with slippage. A good risk/reward ratio only works over a long series of trades, and only with a stop on every one of them. The outcome is never certain, so risk per trade is kept at 1–2% of the account.
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- Stop first, then target, then the decision — is the trade worth it?
- Place the take-profit just before a level, not beyond it.
- At 1:2, one winning trade in three is enough to break even before fees.
- Write down your exit rule before you enter.
FAQ
What risk/reward ratio should I use?
Most people start with 1:2: a target twice as far as the stop. Then, before fees, one winning trade in three is enough to break even. But the target has to be realistic — there should be no strong resistance in the way.
Should I close a trade in parts?
It is a handy compromise: you lock in part at the first target and move the stop to breakeven, and let the rest run. The total gain on a winning trade is smaller, but fewer trades go from green to red.
Why is the take-profit placed just before a level?
Before strong resistance many traders close their buys, and price often turns just short of it. A take-profit a few tenths of a percent before the level gets filled more often.
Can I trade without a take-profit?
Yes, if your exit is set by another rule — for example, a trailing stop. But exiting "when it feels right" is not a rule: in practice people close winners too early and hold losers too long.
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Not investment advice. Trading involves risk — always use a stop-loss.