Price is an elusive concept to most Forex traders. Most of them have no clue about the final price when they place their trades. To make up for this lack of knowledge, a system has been devised to dictate the placing (or lack) of a take profit order while trading Forex. There are a particular set of situations that influence it.
In everyday trading, the most common reason for a take profit order to be placed is your expectation for the market to resist or fight your position at a particular range. For instance, you may encounter a sizeable resistance area on your buy order. This is pretty likely to provide you a headache up ahead. If you are in a position where you can clearly identify and anticipate such obstacles, placing a take profit order makes sense.
But placing such a take profit order is not easy. The factors which have the biggest influence on placing such an order are:
1) If you are trading with the overall long-term trend.
2) If you are trading against the overall long-term trend.1 - Trading WITH The Overall Trend
Placing a take profit order while trading with the overall long-term trend in the market might not be a wise choice. It might possibly lead to a cut in the profits before the move is fully completed. In fact, the smart choice while trading with the trend is to let the trade run its course. By placing a take profit order, you are effectively limiting the trade’s full potential and reaping profits only upto a certain extent.2 - Trading AGAINST The Overall Trend
On the other hand, placing a take profit order while trading against the trend is a wise decision. This is due to the fact that the prevailing trend holds up for a long time. This is exactly why you can expect some obstacles to your position when tackling these areas. The entire force and weight of the market will be working against you. Under this scenario, you are also better off taking your profits and getting out while you can. Trends tend to last for years in the Forex markets and sudden favourable moves can happen.Conclusion
Make no mistake, the moment you place a take profit order, you are curbing potential profits on your trade. There is no way around this. Hence, you need to think long and hard before placing such an order. They are only to be placed in particular situations like when you are trying to make a quick profit and getting out of the market as soon as possible. While trading with the overall trend, you need to be patient for the trade to develop over a long duration of time. If you keep these pointers in mind and apply them at the right moments, you should be able to make the smart decisions when it comes to take profit orders.