Stop Loss: By the use of stop loss the person can limit the extent of loss by fixing the percentage up to which he can bear loss and as soon as the price surpasses that mark, the stop loss would be triggered thereby limiting the extent of loss in a particular trade
Take Profit: whenever a person enters into any trade there is always a target in a trader’s mind that this trade should give him X% profit. So the trader can put his target profit % and as soon as the price reached its target the system should book profit. By virtue of this the trader does not have to sit in front of his screen and wait and watch for the trade to reach its target and then sell it. System will book the profit when price reached to the expected return.
For any trading system, it is important to enter stop loss and target profit percentage as a part of creating a strategy. It is very important that traders plan their entry/exit and risk before entering a trade so as to better manage their risk and return.
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