In trading, one of the critical tools used is TP (Take Profit) and SL (Stop Loss). To break it down, here is what they really mean:
Take Profit (TP)
Definition: A pre-set price level for a trade automatically to close the trade to make a profit.
Purpose: Assists traders to lock in some gains when the market reaches that favorable level.
Example: If you purchase EUR/USD at 1.1000 and have a TP set at 1.1100, the trade will automatically close once the price reaches 1.1100, locking in your profit.
Stop Loss (SL)
Definition: A pre-set price level at which a trade will automatically close to limit losses.
Purpose: Protects traders from losses if the market moves against their position.
Example: Buying EUR/USD at 1.1000 with an SL set at 1.0900, will close the trade automatically when price falls to 1.0900, thereby reducing your loss.