In trading, TP and SL are important risk management tools for locking profits. Here is a definition of what each means:
Take Profit (TP)
Definition: A pre-set price level where a trade will automatically close to secure a profit.
Purpose: Helps lock in gains when the market reaches a favorable level.
Example: If you purchase EUR/USD at 1.1000 and place a TP at 1.1100, the trade will automatically close once the price reaches 1.1100, locking in your profit.
Stop Loss (SL)
Definition: A predetermined price level where a trade will automatically close to prevent losses.
Purpose: Prevents excessive losses from being incurred in case the market moves against the position of the trader.
Example: If you buy EUR/USD at 1.1000, and an SL is activated at 1.0900, the trade closes if the price falls to 1.0900 automatically so that loss is limited.
