Stops and targets

Every trade needs a way out, whether it moves for you or against you. A stop-loss and a take-profit are the two orders that define those exits in advance: one caps what you can lose, the other secures a gain at a level you choose. Setting both before you enter is what turns an exit from a snap reaction into a decision you already made.

Two orders, two jobs

• A stop-loss closes a trade automatically once price reaches a level you set in advance, capping the loss on that position.
• A take-profit closes a trade automatically once price reaches a target in your favour, locking in the gain without you having to watch the screen.

Why set both before you enter

The moment a trade is open, emotion tends to follow. A position moving against you invites you to hold on and hope it turns; a position in profit invites you to take it too early or let it run too far. Fixing your stop-loss and take-profit before you enter means both exits were chosen while you were calm, not decided in the heat of a live position.

Placing them around structure

Traders often place these orders relative to market structure rather than at round numbers. As an illustration, suppose price has bounced off a support level several times. A trader going long might set the stop-loss a little below that support, so the trade closes only if the level genuinely breaks, and place the take-profit near a resistance area where price has stalled before.