Risk management

Take Profit and Stop Loss: the Complete Guide

Astron Team · 09/24/2026 · 4 min read

Take profit and stop loss are two prices set before opening a trade: one marks where the planned profit will be realized, the other marks how far the loss is acceptable. It sounds simple, but how these two levels are calculated — not just the fact that they exist — is what separates solid risk management from a bet made in the dark.

This guide explains how to set both levels with technical backing, how they relate to each other through the risk-reward ratio, and the most frequent mistakes that make traders abandon their own rule mid-trade.

What the stop loss is and how to calculate it

The stop loss is an order that closes the trade automatically when the price reaches a predefined loss level. The most reliable way to place it is using technical references from the chart itself, not an arbitrarily chosen round number. The three most common approaches are: placing the stop slightly beyond a recent support or resistance, using a multiple of the ATR (the asset's average range of movement) to respect normal volatility, or setting a fixed percentage of the entry price, more common in longer-term trades.

What the take profit is and how to calculate it

The take profit closes the trade automatically when the price reaches the planned profit level. It's usually set at a previous resistance (for buys) or previous support (for sells), at a Fibonacci extension, or as a direct multiple of the risk taken at the stop loss — for example, two or three times the distance between the entry and the stop.

The risk-reward ratio in practice

Suppose a buy at R$ 100.00 with a stop loss at R$ 97.00 (risk of R$ 3.00) and a take profit at R$ 106.00 (potential of R$ 6.00). The risk-reward ratio is 1 to 2: for every dollar risked, the target seeks two dollars of return. This ratio matters because it changes the minimum win rate needed for the result to be positive across many trades: with a 1 to 2 ratio, a trader can lose more than half the time and still end up profitable, as long as they follow the stop and the target with discipline.

To illustrate: in ten trades with this same ratio, four wins and six losses result in a gain of R$ 24.00 (4 × R$ 6.00) against a loss of R$ 18.00 (6 × R$ 3.00), a positive balance of R$ 6.00 even with a win rate of just 40%.

Common mistakes when setting both levels

• Moving the stop loss further away after the price is already approaching it, hoping the market will reverse — this practice tends to turn a small loss into a big one.
• Setting the take profit so close to the entry that winning trades yield very little relative to the risk taken, creating an unfavorable risk-reward ratio even with a good win rate.
• Placing the stop loss at an obvious round number, without considering the chart's structure, which increases the chance of being hit by a noise move before the expected reversal.
• Ignoring the cost of spread and fees when calculating the trade's real risk and return, especially in short-term trades.

The breakeven stop

An intermediate technique is moving the stop loss to the entry price once the trade has moved far enough in your favor, eliminating the risk of the trade turning into a loss after it has already shown a partial profit. This doesn't replace a well-defined take profit or trailing stop, but it reduces the anxiety of watching a trade that's already in the green.

Building your routine with both levels

Before any entry, set the stop loss based on a clear technical reference, calculate the take profit aiming for at least double the risk taken, and log both levels before confirming the order — not after. Testing this discipline on a Astron demo account, tracking the results in your trading journal, helps you see in practice whether the chosen risk-reward ratio actually holds up across many trades, since no single trade guarantees a profit.