Why set one at all
Because deciding when to leave a winning trade is harder in the moment than deciding before entering. Without a target, the exit is made on feeling, and feeling in a winning position tends to say either "take it now" too early or "let it run" too long.
Where the target comes from
Either from the chart — the next level price would have to fight through — or from a ratio applied to the stop. The two often disagree, and when the chart offers less than the ratio requires, that is information about whether the trade is worth taking.
Moving it is not the same mistake as moving a stop
Widening a stop increases risk beyond what was planned. Extending a target does not, but it changes the trade you are in, and it usually happens because the position is winning and greed has arrived. A trade with a moving target has no defined edge to measure.
Partial exits
Closing half at a first target and letting the rest run is common and it changes the arithmetic. The effective reward to risk on the whole position is lower than the number on the remaining half, and any record kept in R has to account for it.
In short
| Set | Before entering, with the stop |
|---|---|
| Sourced from | Chart levels or a fixed ratio |
| Guarantees | A limit fill at that price or better |
| Partial exits | Lower the effective reward to risk |
Common questions
Should I always use a take profit?
Not necessarily, but the alternative needs a rule. A trailing stop or an exit on a signal are both defined; "I will know when" is not, and it cannot be reviewed afterwards.
What if price nearly reaches my target and reverses?
That will happen, repeatedly. The question a journal answers is whether it happens often enough that a closer target would have been better overall, which is a measurement rather than a memory.
Is a bigger target always better?
No. A larger target is hit less often, and the two effects can cancel. What matters is the ratio and the win rate together, which is what expectancy measures.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.