A take profit is the exit on the winning side: the price at which you plan to close the trade and keep the gain, usually as a limit order placed at entry. Together with the stop loss it fixes the trade's planned shape before the market has a say.
Planned risk-reward
planned R:R = |take profit − entry| / |entry − stop|
Long at 100, stop at 98, target at 106: the target is 6 points away, the stop 2. Planned R:R is 3.0, so a win at the target would be +3R.
Ways to set a target
- Structure: the next swing high or low, a prior day's high, a range boundary.
- A fixed R multiple: 2R or 3R, simple and testable.
- No fixed target: trailing the stop and letting the market decide. Common in trend following; the planned R:R is then undefined and the exit efficiency is the number to watch.
- Several targets: part at 1R, the rest at 3R, which is scaling out.
Plan versus result
The target is a plan. The journal shows what the plan was worth. Compare the planned R:R with the realized payoff ratio: a 3.0 plan that turns into a 1.4 average win means targets are rarely reached or are abandoned early. The MFE tells you which: if the market regularly reached the target and you were already out, it is the exit, not the target.
In SetupBook
Take profit is a field next to the stop in step 1 of the trade form; with entry and stop it gives the planned R:R, which has its own column in the trades table. The form also checks that the target sits on the profitable side of the entry for the direction chosen.