Take Profit/Stop Loss is used to close positions.
Usage scenarios:
● When placing an order (e.g., a limit order, market order, stop limit order, or stop order) to open a position, you can set a take-profit or stop-loss price. The take-profit or stop-loss price will be active after the order is filled in full and a position is held.
● You can also set a take-profit or stop-loss price for a position you hold. By applying such settings, the position you hold will be closed entirely when the trigger price is met.
1. Take Profit/Stop Loss
You may choose among four parameters, i.e., [None], [Take Profit], [Stop Loss], or [Both]. [None] is set by default, meaning that no take-profit or stop-loss price will be set.
● Take Profit: Only a take-profit price will be set. It aims to take profit by closing a position when the take-profit price is met.
● Stop Loss: Only a stop-loss price will be set. The purpose is to stop loss by closing a position when the price of underlying securities moves toward wrong direction.
● Both: Both a take-profit price and a stop-loss price will be set. A market order will be submitted to take profit or stop loss, depending on which trigger price is hit first. When the market order fills, the trigger price which is not met will be inactive.
2. Take-profit price
When the take-profit price is hit, a market order, in the opposite direction but with the same size, will be submitted.
3. Stop-loss price
When the stop-loss price is met, a market order, in the opposite direction but with the same size, will be submitted.
Assume that the market price (ask price) of EURUSD is 1.02020. An investor places a buy limit order at a price of 1.02010 and with a size of 1,000. The investor also sets a take-profit price of 1.02100 and a stop-loss price of 1.01900. After the limit order is filled and a position is held, the take-profit and stop-loss prices will be active and the system will start to monitor whether the market price meets the take-profit or stop-loss price.
Assume that the market price (bid price) of EURUSD hits the take-profit price of 1.02100 first. The system will submit a sell market order, at a price of 1.02100 and with the same size of 1,000, to close the position. After the order is filled, the position will be closed to take profit, and vice versa.
4.1 For a pending order, the take profit price and the stop loss price are only two incidental parameters. After they are set, no specific order will be generated. The two parameters will be invalid automatically after the pending order is cancelled.
4.2 For a pending order, the take-profit and/or stop-loss prices will not be active until it is filled and a position is held.
4.3 For a position, the take profit price and the stop loss price are only two incidental parameters. After they are set, no specific order will be generated. The two parameters will remain valid during the period when the position is being held.
4.4 For a position, when the take-profit or stop-loss price is hit, a market order will be submitted to close it. With Take Profit/Stop Loss, a position will usually be fully closed. Please note that the slippage may occur because the order submitted after the trigger is a market order.
4.5 For a position, the restriction of the take-profit or stop-loss price is only related to the market price at the moment when setting price, and has nothing to do with the profit and loss of the position. That is, the following scenarios may occur:
● In the case of a long position (usually the position has already incurred a loss at this time), if the set take profit price is lower than the open price, the position may be closed at a loss after the take profit is triggered.
● In the case of a long position (usually the position is profitable at this time), if the set stop loss price is higher than the open price, the position may be closed at a profit after the stop loss is triggered.
● In the case of a short position (usually the position has already incurred a loss), if the set take profit price is higher than the opening price, the position may be closed at a loss after the take profit is triggered.
● In the case of a short position (usually the position is profitable at this time), if the set stop loss price is lower than the opening price, the position may be closed at a profit after the stop loss is triggered.
4.6 Take profit/Stop loss will only be triggered during the continuous trading session.
4.7 If a position is partially closed, the take-profit and/or stop-loss prices will not be affected by the new order.
4.8 If a position is fully closed, the take-profit and/or stop-loss prices will be inactive automatically.