Stop loss and take profit: what they do and their limits
A stop loss is an exit instruction intended to limit an adverse move; a take profit is an exit instruction at a favourable target. Trigger and execution rules depend on the instrument and platform. MetaTrader describes Stop Loss and Take Profit.
Does a stop guarantee the price?
A standard stop is not a guaranteed execution price. The SEC's explanation of stock stop orders shows why a triggered market order can fill beyond the stop in a fast market. Read the SEC investor bulletin. For a CFD, check the provider's own execution terms rather than assuming stock-market rules apply unchanged.
A planned-loss example
Assume a long position is entered at 100, with a stop at 98 and exposure of 10 currency units per price point. The planned price loss is (100 − 98) × 10 = 20 units before costs. If execution occurred at 97.50, the price loss would instead be 25 units. The example illustrates slippage; it does not predict its amount.
What does a take-profit target mean?
A target at 104 in that example represents a planned gross gain of 40 units if filled there. It is a target, not a promise that the price will reach it or that the order will execute as assumed.
Check order acceptance, volume and the applicable execution policy. Combine exit planning with position sizing and costs.
Educational information only. Examples exclude costs unless stated and do not describe a recommended trade or guaranteed outcome.