Take profits orders can be used to lock-in profits and exit a profitable trade, once the trigger price has been reached.
- Take profit orders are market orders (executed at the best available price) but with a trigger price.
- Take profit orders are executed when the mark price (=index price) reaches the trigger price.
- Take profit orders are the inverse of stop loss orders, allowing you to close out a position at a predetermined level.
- Once a take profit order is fulfilled, the trader is a “market taker” and incurs a taker fee for taking liquidity from the order book.
- Since take profit orders are executed as market orders, the only order flag that is available is Reduce-only.
In this article, we’ll show you how to use take profit orders on Interdax along with an example.
Take Profit Order Example
Suppose you are long 10,000 BTC-PERP contracts at $10,000 and set a take profit order with a trigger price of $10,350. Once the mark price reaches the trigger price of $10,350, the take profit order will be executed at the best available price and closes your long position at a profit. Since take profit orders are market orders with a trigger price, a taker fee is paid on execution of these orders.
The reduce-only order flag can be used with take profit orders, which ensures that these orders are only executed if you are currently in a position. For example, a trader is long 10,000 BTC-PERP contracts with a fill price of $10,000 and sets a reduce-only take profit order at $10,350.
Once the mark price hits the trigger price, the take profit order will reduce the long position. If the take profit order is 10,000 contracts, then the entire position is closed, while a lower quantity will only partially close the position.
If the 10,000 contract position is closed before the take profit order is filled, once mark price hits $10,350 the reduce-only order is amended to 0 contracts and cancelled, since there is no position to reduce.
You can also use take profit orders in conjunction with stop orders to pre-define the risk and reward of a position. Using reduce-only order flags for both stop orders and take profit orders ensures that your position is not unintentionally increased.
For example, a trader is long from $10,000 with a take profit sell order at $10,350 and a stop loss sell order at $9,950. Without reduce-only order flags, the price could dive to $9,950 and below then rise sharply to $10,350. The stop loss at $9,950 would close the long position and then an unintentional short position is opened (due to the take profit order being set without the reduce-only flag).
Similarly, the price may rise to $10,350 and your trade is closed out for profit, but if the market moves south, you will enter a short position at $9,950 if the stop loss order does not have the reduce-only flag. By using reduce-only order flags with stop orders and take profit orders, whichever order is filled first reduces the position. The remaining order becomes inactive and is cancelled.
How to Use Take Profit Orders
Take profit orders are just like market orders but with a trigger price. Unlike limit orders, take profit orders do not appear in the order book.
To set a take profit order, go to the order panel, and select 'Take Profit'. Then enter the trigger price or use the slider. Tick the box next to reduce-only to enable a reduce-only order flag.
Once you have set the quantity and trigger price, click on ‘Set Sell Trigger’ or ‘Set Buy Trigger’.
After the take profit order is confirmed, the order will appear in the ‘Conditionals’ tab of the Positions panel (shown below) until it is executed.
Once the take profit order has been submitted, you can drag it on the chart to amend the trigger price. A notification will appear on the bottom right-hand side once the order's trigger price has been amended.
To adjust the number of contracts for a take profit order, click on the quantity on the chart or amend the number of contracts from the ‘Conditionals’ tab of the positions panel. A notification will appear on the bottom right-hand side once the quantity has been amended.
To cancel a take profit order, go to the 'Conditionals' tab of the Positions panel and click on 'Cancel'. Take profit orders can also be cancelled if you click on the X on the price chart, shown below. A confirmation that the order has been cancelled will appear in the bottom right-hand side of the interface.
Take profit orders allow you to set exit points for a trade without having to monitor the market. A take profit order avoids the issues associated with limit orders, such as a partial fill of your position when the trigger price is reached. But since a take profit order is a variant of a market order, the position may get filled at a slightly worse price than your trigger price.