A stop loss (S/L) order automatically closes a trade to limit losses when a set price is reached, while a take profit (T/P) order closes a trade to secure profits at a predetermined level. Both help manage risk and profits, but execution at specified levels isn't guaranteed during high volatility or low liquidity.
Difference between S/L and T/P
| Order type | Purpose | How it works |
|---|---|---|
| Stop loss (S/L) | Helps limit losses | Automatically closes a trade when the market reaches the specified loss level. |
| Take profit (T/P) | Helps secure profit | Automatically closes a trade when the market reaches the specified profit level. |
Example use
| Situation | Possible use |
|---|---|
| Market moves against your trade | S/L may close the trade to limit further losses. |
| Market reaches your target level | T/P may close the trade to secure profit. |
Important notes
- S/L and T/P are risk management tools.
- Execution at the exact specified price is not guaranteed.
- During high volatility, low liquidity, or market gaps, orders may execute at a different price.