Take profit and stop loss, without the folklore

Take profit and stop loss are the two levels that close a position for you. One takes the win, the other limits the damage. Neither is complicated, but a fair amount of folklore has grown up around them, so it is worth being precise about what they actually do.

What each one is

A take profit closes your position once the market reaches a level that is favourable to you. A stop loss closes it once the market reaches a level that is not. Both are set relative to the price you entered at, and both are optional on MGG: you can place an order with neither, with one, or with both.

Which side of your entry they go

This is where most of the confusion lives, and it comes down to one rule: take profit goes where you want the price to go, and stop loss goes where you do not.

For a long position, where you profit if the price rises:

• Take profit sits above your entry.
• Stop loss sits below your entry.

For a short position, where you profit if the price falls, both swap:

• Take profit sits below your entry.
• Stop loss sits above your entry.

MGG validates this before accepting an order. A level on the wrong side of your entry for the direction you are trading is rejected with a message explaining what is wrong, because such a configuration cannot behave the way you intended.

Where to put them

There is no universally correct distance, but there are two bad habits worth avoiding.

The first is placing a stop so close to the entry that ordinary noise takes you out. Every market has a normal amount of movement that means nothing. A stop inside that range is not managing risk; it is guaranteeing a small loss on a regular schedule.

The second is placing a stop so far away that it never realistically triggers. A stop you have positioned purely so that it will not be hit is a stop that is not doing anything, and it leaves you with an unbounded loss you have told yourself is bounded.

A useful test: decide the level first, from what the market is doing, then work out the size of the position from the loss that level implies. Not the other way round.

When to move them

Moving a take profit further away as a position runs in your favour is a normal way to let a good position keep working. Moving a stop loss up behind a rising long position, so that it locks in some of the gain, is equally normal.

Moving a stop loss further away because the position is going against you is a different thing entirely. It converts a decision you made calmly into one you are making under pressure, and it removes the only limit on how much the position can cost you. If the original level was wrong, closing and reassessing is usually healthier than widening the stop and hoping.

How MGG handles them

• Both fields are optional on every order, of every type, on both sides.
• Each is validated against your entry price and your direction before the order is accepted.
• The ticket shows what you stand to make at the take profit and lose at the stop loss, in cash, before you confirm.
• Any open position lets you add, modify or remove either level afterwards, with the current value shown beside the field for the new one.
• Positions display both levels, or a clear "Not set" where one is absent, so the state is never ambiguous.

If you are still working out the order types themselves, start with market, limit and stop orders explained.