A take profit is an order that automatically closes a trade in profit once price reaches a target you set in advance. It removes the temptation to hold a winner too long and gives every trade a defined reward to weigh against its risk. Paired with a stop loss, it lets you plan the full trade before you enter it.
Buying XAUUSD at 2400 with a stop at 2390 and a take profit at 2420 plans a 1:2 trade — risking 100 pips to make 200 if the target is reached.
This definition is for educational purposes only and is not financial advice. Trading involves risk.