Take profit orders allow you to set a target profit price when trading on Kraken (with or without the use of margin).
Note that, since a market order is created when your profit price is reached, your order may fill at a lower (in case of a sell) or higher (in case of a buy) price than the profit price. For markets with high volatility and relatively low liquidity, like cryptocurrency markets, it is likely that your fill price will be significantly lower or higher than your profit price.
Take profit: Triggers a market order (buy or sell) when the last traded price hits the profit price you specify.
Profit price: The price at which the take profit order triggers, specified by you.
The profit price can be set in terms of absolute price or as a percentage. As with stop orders, take profit orders can also be used to open positions (see examples for illustration). It is important to note that your take profit order is not directly tied to a position (not reduce only) but is an independent order and if you exit a position in an alternate way the take profit must also be manually cancelled.
Take profit orders vs limit orders
Regular limit orders can also be used as a way to take profits. Here is how the two order types differ:
- Take profit orders guarantee the full volume will be executed, with the risk of possible market price slippage. They incur a taker fee.
- Limit orders guarantee the limit price or better, but cannot guarantee that all of your volume will be executed. They incur a maker fee (if done correctly).
Both order types can be used with unleveraged spot trades or long or short positions (resulting from spot trades using margin).
Example: Suppose you bought BTC at $10,000 and want to set a profit target at $12,000. You can create a take profit limit sell order with a profit price of $12,000. You could achieve a similar result with a limit sell order at $12,000. However, if you want to sell at market once the highest bid price reaches $12,000, this can be done by creating a take profit order with a profit price of $12,000. In this scenario, your average fill price on the sell order could be below $12,000.
Take profit orders can also be used to open positions. Suppose you want to open a short BTC/USD position at market once the highest bid price rises to $12,000. You can do this by creating a take profit sell order at $12,000.