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A take-profit order is a type of limit order that automatically closes a trade when the price reaches a predetermined profit target. It allows traders to lock in gains by exiting a position at a favorable price level without needing to actively monitor the market. Take-profit orders are commonly used in conjunction with stop-loss orders to manage risk and reward in a trade.
A trader buys a stock at $100 and sets a take-profit order at $110. If the stock price reaches $110, the position is automatically sold, locking in the profit.
• An order to sell a security when a specific profit target is reached.
• Used to lock in gains and manage risk in a trade.
• Commonly combined with stop-loss orders for balanced risk management.
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