eToro’s online investment platform has a take profit feature, which is an important tool in trading as it allows traders to automatically close a position in the event that a certain profit level has been reached. If you’re new to this specific trading command and would like to know more about it, then here’s a comprehensive guide on how to use this order on the eToro platform.
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What is eToro’s Take Profit?
A take profit (TP) order on eToro’s platform can be used so that it will automatically close a trade at a specific price level so that you will be able to lock in on the current profits for that specific position.
Let's say you placed an investment on gold and its price was around $55 and you set the platform to close your open trade if it reaches the price of $60 or higher. The next day, the price of the precious metal hit $60.01 so the platform automatically closed your open position and the profits were added to your balance!
Isn't that cool?
Provided that there is sufficient liquidity in the market, the platform lose the trade when the market price reaches the price level you specified. This can help you to avoid the need to constantly monitor the market and manually close your position at the desired price level. However, it's important to note that take profit orders are not guaranteed to execute at the exact price level specified, particularly in volatile markets.
How Do I Set a Take Profit Level on eToro?
In order to set a take-profit (TP) level on eToro's online trading platform, simply follow the steps below:
- Open a position: Before you can set a take profit level, you must open a position on eToro. To do this, select the instrument you want to trade, choose whether to buy or sell, and set the amount you want to trade.
- Click on "Edit Trade": Once you have opened a position, go to the "Portfolio" section of your account and click on the "Edit Trade" button next to the position you want to set a take profit level for.
- Set the take profit level: Under the "Take Profit" tab, set the profit level at which you want the position to be closed. You can set the take profit level as a percentage or a specific price.
- Check and confirm: Take a look at the take profit level and make sure that it is set correctly. Once you are satisfied, click the "Set Take Profit" button to confirm the level.
- Monitor your position: After setting the take profit level, monitor your position to see if the price reaches the target level. If the price reaches the target level, the position will be closed automatically, and you will make a profit.
Take note: Setting a TP level does not guarantee that you will make a profit, as market conditions can change rapidly. It's important to monitor your positions and adjust your take profit level or close your position manually if necessary.
Can I Change the Take Profit Level after I Have Opened a Position?
Yes, you can change the take profit level after you have opened a position on eToro. To do this, follow these steps:
- Go to the "Portfolio" section of your account and click on the "Edit Trade" button next to the position you want to change the take profit level for.
- Under the "Take Profit" tab, change the profit level to the new target level you want to set. You can set the take profit level as a percentage or a specific price.
- Recheck and confirm: Recheck the new take profit level and make sure that it is set correctly. Once you are satisfied, click the "Set Take Profit" button to confirm the new level.
What Happens If the Price Never Reaches the Take Profit Level?
Here's the thing:
If the price never reaches the take profit level that you set on eToro, your position will remain open until you close it manually, or until another price level is triggered such as a stop loss level.
If the price is not moving in your favor, you may want to consider adjusting your take profit level or setting a stop loss to limit your losses.
Additionally, you can monitor the market conditions and adjust your trading strategy accordingly. You can use technical or fundamental analysis to help determine when to close a position and take profits or cut losses.
Fees for Using Take Profit
eToro does not charge any fees specifically for using the take profit feature. However, eToro's fee structure includes spreads and overnight fees, and these fees may apply to positions that are closed through the take profit feature:
The spread is the difference between the bid and ask price of an asset, and it represents the cost of trading on eToro. When you open a position, the spread is automatically factored into the opening price, and when you close a position, the spread is factored into the closing price.
Overnight fees, also known as rollover fees, may apply to positions that are held overnight. These fees are charged for the cost of keeping a position open overnight, and they vary depending on the asset and the amount of leverage used.
It's important to be aware of eToro's fee schedule and understand how the fees work before using the take profit feature or opening any positions on the platform.
Difference Between Take Profit and Stop Loss
Take profit and stop loss are two tools that traders can use to manage their risk and maximize their potential profits, but they work in different ways.
Take profit is a feature that allows traders to automatically close a position once it reaches a specific profit level. It is designed to lock in profits and prevent traders from giving back gains if the market reverses. When a trader sets a take profit level, the platform will automatically close the position when the asset reaches the specified price, realizing the profit.
Stop loss, on the other hand, is a feature that allows traders to automatically close a position once it reaches a specific loss level. It is designed to limit potential losses and protect traders from significant downside risks. When a trader sets a stop loss level, the platform will automatically close the position if the asset reaches the specified price, preventing further losses.
In short, take profit is used to lock in profits, while stop loss is used to limit losses. Both features can be used in combination to help traders manage their risk and improve their chances of success. It's important to note that both features have limitations, and traders need to monitor the market and adjust their positions as necessary to achieve their goals.
Using TP on All eToro Assets
Take profit can be used on most financial instruments that are available on eToro, including stocks, cryptocurrencies, commodities, and forex pairs. However, it's important to note that not all financial instruments have the same level of liquidity, and some may be more volatile than others, which can affect the execution of take profit orders.
In addition, eToro's take profit feature is subject to availability and may not always be available for all financial instruments. Before opening a position, you should check whether the take profit feature is available for the specific asset you want to trade.
It's also important to note that take profit does not guarantee profits as the market can be unpredictable. It's important to monitor your positions and adjust your take profit level or close your position manually if necessary to manage your risk and achieve your trading goals.
Is It Recommended to Use Take Profit for Every Trade?
Using take profit for every trade is not always recommended because it depends on the trader's individual trading strategy and goals. Take profit is a tool that traders can use to help manage their risk and maximize their potential profits, but it is not a one-size-fits-all solution.
Traders need to consider various factors before using the take profit feature, including the level of risk they are willing to take, their profit targets, the volatility of the asset they are trading, and the current market conditions. For some traders, using take profit for every trade may be part of their trading strategy, while for others, it may not be necessary.
Additionally, some traders may prefer to use other tools such as trailing stop-loss or manual exit strategies to manage their positions, depending on their trading style and experience.
In general, it's important for traders to understand how the take profit feature works and to use it judiciously as part of a comprehensive trading plan. Traders should also be prepared to adjust their positions and take profit levels as necessary based on changing market conditions.
Can I Use Take Profit to Lock in Partial Profits?
Yes, you can use a take profit order to lock in partial profits by setting the order at a level that will trigger the sale of only a portion of your position when the market reaches that price. This allows you to secure some profits while leaving the remaining position open to potentially capture further gains.
How Do I Know If My TP Has Been Executed?
You can typically check whether your take profit order has been executed by checking your order history or trade log. When the market reaches the price level you specified for your take profit order, the order will be executed and you should see a corresponding trade entry in your order history or trade log. You can also check your account balance or portfolio value to confirm that the partial profits from your executed take profit order have been added to your account.
The Bottom Line?
eToro's take profit is a very useful order to automatically close a position if and when a certain profit level has been reached by the financial instrument that you have invested on. However, it is important for you to be prudent and to always monitor your investments, particularly the open positions, in order to properly use this feature.
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