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Assume that I go long 100 XYZ @ $1,000, and I want to close the position once the price reaches $1,100. I can see two options,

  1. I create a "sell limit order" for 100 units @ $1,100
  2. I create a "sell take profit limit order" with trigger price of $1,100 and limit price of $1,100

What is the difference between the two strategies?

The only difference that I can see is that with the second strategy, I may end up closing the position at a price higher than $1,100 whereas with the first strategy, I will close it at exactly $1,100 (provided that there are the conditions for closing the position)

Is there any other difference?

1 Answer 1

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You might do better with a sell limit order, but that is unlikely with electronic order execution.

A take-profit order is a limit order that specifies the exact price at which to close an open position for profit. In other words, you'll get that amount of profit and no more. The security could breakout higher, but the take profit order might execute at the very beginning of the breakout so you would miss out on that upside.

For a sell limit order, emphasis mine, same source:

you're setting a price floor—the lowest amount you'd be willing to accept for each share you sell. This means that your order may only be filled at your designated price or better. However, you're also directing your order to fill only if this condition occurs.

So it is possible that your order will be executed at better than the designated price, but you shouldn't count on it.

Keep in mind that both of those types of limit orders have risk of a partial fill, leaving the unfilled shares as an open order unless you place the order as fill-or-kill.

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  • isn't that the same as a limit order? Commented Dec 14, 2022 at 16:49
  • @user253751 They seem just about identical to me! Since you asked here, I wanted to explain that there is a tiny probability of you getting a better execution with a sell limit order. Like maybe 1 in 1000 or 1 in 10,000 but it isn't possible to be more precise. Modern electronic order execution for retail traders is very consistent. So yes, they are effectively the same. Oh, one more thing: Make sure that it doesn't cost more to execute one type of order than the other! I don't know if you're using a full service or discount broker, or no fee RobinHood type. If the latter, you should be okay. Commented Dec 18, 2022 at 14:46

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