The Take Profit in the CFD is a very useful and convenient feature that allows you to establish a level of benefit, in which the position is closed automatically by the trading platform. Therefore, it is a useful order to capture profits once the goal is reached.
In the last lesson, we talked about Stop Loss, which allows us to automatically block losses. Well, profit-taking works the same way, but to “make cash.”
It is good to note that to apply stop loss and take profit to CFDs, it is necessary to operate on a platform that has these functions ( access through this official page ) or the platform we use for the examples included in this lesson, eToro.
How CFD Take Profit works
Suppose we anticipate a price increase for Amazon shares. That is, we expect Amazon shares to rise in the coming days.
Well, to take advantage of this forecast we need to open a “Buy” position in Amazon shares.
Also, suppose we have a goal: to earn 100 euros.
Well, we can apply this objective to the trading platform with the Take Profit feature. In fact, if we set the Take Profit at 100 euros, the position will be closed automatically once that profit share has been reached .
Obviously, it goes without saying that the position will not be closed until this quota is reached. In addition, the loss hypothesis should always be considered, in case of incorrect forecast.
Taking profit for bearish trades
In the previous hypothesis we spoke of an upward forecast, however it should be emphasized that the take profit can also be applied to downward operations , or rather to “Sell” operations.
The fact of CFDs allows you to trade both up and down, so looking for profit is if the price goes up and when it goes down.
The only difference between taking profit for up positions and for downturns is that for downside positions, the profit taking must be below the current price . In fact, the trader wins if the price falls, so the take profit must be placed below the price at which the position is opened.
Automatic trading, from computers and smartphones
Trading can become a stressful activity. After all the operations you get tired and do not necessarily have time to do it.
The Take Profit function, as well as the Stop Loss and other types of Stops, allows you to carry out automatic trading operations without the need to be present.
If the condition established in the previous paragraph is met, that is, that a certain level of profit is reached, the platform will close the operation and they would have € 100 more in their account.
What happens if the price does not reach the established quota?
If a price does not reach a certain level set with the Take Profit, you will not be able to take any action. Therefore, the position would remain open.
For example, if you leave an open position with a take profit of € 100, even in the case of a raise with a profit of € 99.99 for the current trade, the Take Profit would not be activated. This is very accurate and only kicks in if the stability level is reached.
So if a position hit 99.99 and went back to 20 or -20, or -99, you wouldn’t have made it for a single penny.
For this reason, we advise you to choose the values to configure well.
Furthermore, we recommend that you always set the Stop Loss as well.
Practical example of how to configure Take Profit
For our CFD take profit setup example, we will use the eToro platform, which among its many easy-to-apply features also includes take profit.
First, let’s select an asset from the list. In the favorites list you can put all the titles and assets that you prefer. For example, we can select Amazon shares (CFD on Amazon shares).
By clicking on it, we will access the information page of the selected underlying asset (Amazon share).
By clicking on “Invest” we will access the order window.
The procedure for setting up CFD profit taking will be as follows:
1.Set the trade amount (by default, there are often quite high odds, but you can change them based on your preferences)
2. Click Buy or Sell based on your forecast (bullish or bearish).
3. Check the CFD Take Profit box and then set the desired price for the stop loss, corresponding to the desired profit amount.
Finally, to open the position, simply click on “Open Position”. In this case (see below in the screenshot) since the US market was still closed due to the time, “established order” appears instead of “Open position”. The order in this case is opened when the market reopens.
In addition to taking profits with CFDs, it is always advisable to always set the Stop Loss, using the same procedure described here to take profits.
Go to the next lesson: Operational shutdown, what it is for, how it works.
Take Profit CFD FAQs
What is the Take Profit of CFDs?
Take Profit is a trading order that allows you to order the platform to close a position when it reaches a certain level of profit.
Where is Take Profit configured?
To configure Take Profit, you must open the buy or sell order window for the desired asset.
How do I set up profit taking?
To set the Take Profit, you need to enter the desired price in the relevant item in the order window. For buy positions, it must be set above the current price. For sell positions, it must be set below the current price.
When is Take Profit activated?
Take Profit is activated when the set price level is reached.