In trading, TP (Take Profit) and SL (Stop Loss) are crucial tools used to manage risk and lock in profits. Here’s a breakdown of what they mean:
Take Profit (TP)
Definition: A pre-set price level where a trade automatically closes to secure a profit.
Purpose: Helps traders lock in gains when the market reaches a favorable level.
Example: If you sell EUR/USD at 1.1000 and set a TP at 1.1100, the trade will automatically close if the price reaches 1.1100, locking in your profit.
Stop Loss (SL)
Definition: A predetermined price level where the trade automatically closes to reduce losses.
Purpose: This ensures that the trader does not lose too much money if the market moves against his/her position.
Example: If you buy EUR/USD at 1.1000 and set an SL at 1.0900, the trade will close automatically if the price drops to 1.0900, limiting your loss.
