TP (Take Profit) and SL (Stop Loss) are important concepts in trading, particularly in forex, stocks, and other financial markets. They are used to manage risk and lock in profits.
1. Take Profit (TP):
- Definition: TP is a pre-set level where a trader decides to close a trade and lock in profits. When the market price reaches the TP level, the trade automatically closes, and the profit is secured.
- Example: If you buy EUR/USD at 1.1000 and set a TP at 1.1050, once the price reaches 1.1050, your trade will close automatically, and you’ll make a profit based on the difference.
2. Stop Loss (SL):
- Definition: SL is a pre-set level where a trader chooses to exit a trade to limit losses. When the market price moves against the position and hits the SL level, the trade closes automatically to prevent further losses.
- Example: If you buy EUR/USD at 1.1000 and set an SL at 1.0950, if the price drops to 1.0950, the trade will close, limiting your loss to the difference.
Both TP and SL are crucial for protecting a trader’s capital and ensuring disciplined risk management in volatile markets.
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