Many signals show two targets. TP1 is the closer one, TP2 is further away. They exist so you can choose between banking profit early and letting some of the trade run.
The Common Approaches
| Approach | What you do | Trade-off |
|---|---|---|
| Close all at TP1 | Take the whole profit at the first target | Higher chance of a win, smaller payoff |
| Split | Close part at TP1, hold the rest for TP2 | Balance of both |
| Hold for TP2 | Ignore TP1 and wait for the far target | Larger payoff, hit less often |
A Worked Example
Short at 100.00, stop at 105.00 (risk 5.00 = 1R). TP1 is at 92.50 (+1.5R) and TP2 at 62.50 (+7.5R). Suppose you close half the position at TP1 and half at TP2. If both hit, the result is 0.5 x 1.5R + 0.5 x 7.5R = +4.5R. If TP1 hits and price then returns to the original stop, the banked half made 0.75R and the other half loses 0.5R, a net of +0.25R instead of a full -1R loss.
Managing the Stop After TP1
After TP1, some traders move the stop to the entry (breakeven) or tighter so the rest of the trade cannot become a loss. This is often called a managed stop. The trade-off is that price may pull back to the new stop before heading to TP2.
Decide before you enter
Pick your approach before the trade starts. Changing the plan mid-trade is how losses grow.
- →Know how much you will close at TP1.
- →Know whether the stop moves, and to where.
- →Write it down so you do not decide under pressure.
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Try The Secret Vault FreeWhat does a managed stop mean?
A stop loss that is moved after the trade starts, commonly to breakeven or tighter once the first target is reached.