Take Profit Ladders: TP1, TP2 and TP3 Explained
Macro Glossary, Orders and Risk
By Ken Chigbo, macro trader and founder of KenMacro, 18+ years in markets.
Updated 2026-05-20
The desk’s answer
A take profit ladder closes portions of a position at successive target levels rather than exiting the entire trade at one target. The standard structure is TP1 at 1R (one times the stop distance, take off one third), TP2 at 2R (take off another third), and TP3 at 3R or trailed (let the final third run with a moving stop). The structure converts the trade from a binary win-or-lose outcome into a graded one: even if the move only reaches TP1 and the rest stops out, the average expectancy across many trades is positive at typical strategy hit-rates.
Defined term, Take profit ladder
A take profit ladder is a multi-stage exit strategy that closes portions of an open position at successive price targets (commonly TP1, TP2, TP3). It is designed to lock in partial profit at the first target while leaving residual size to capture larger moves, balancing the probability of a small win against the expected value of a larger continuation.
The standard 1R / 2R / 3R ladder
On a trade with a 50-pip stop, the targets are TP1 at 50 pips of profit (1R), TP2 at 100 pips (2R), TP3 at 150 pips (3R) or trailed. With one-third position size taken off at each target, the realised outcome on a TP1-then-stop trade is +1R on a third minus 1R on two thirds = roughly minus 0.33R. A TP1-then-TP2-then-stop trade is +1R on a third, +2R on a third, minus 1R on a third = +0.67R. A full TP1-TP2-TP3 sequence is +1R + 2R + 3R divided by three = +2R. The math means even a 40-percent strategy delivers positive expectancy if the runner reaches TP2 or TP3 on the wins.
Why ladders work better than single-target exits
Three reasons. First, partial profit at TP1 changes the psychology of the trade: the remaining position is house money, which reduces the emotional pressure to bail before TP2. Second, moving the stop to breakeven after TP1 converts the residual into a position with zero remaining downside, which lets it run for the full move without account-balance pressure. Third, the ladder captures both the high-probability small wins (most trades reach TP1) and the rare full-extension wins (TP3 or trailed runners) that drive long-term expectancy. A single-target exit forces a choice between hit-rate and expectancy; the ladder takes both.
When to deviate from the standard ladder
Three common adjustments. First, on a thesis trade where the macro driver is strong, weight the ladder toward the runner: 25 percent off at TP1, 25 percent at TP2, 50 percent trailed. Second, on a fade or counter-trend trade where the probability of full extension is low, weight toward the front: 50 percent at TP1, 30 percent at TP2, 20 percent at TP3. Third, on news event trades where the move can fully resolve in minutes, run a single tighter exit (1.5R) and skip the ladder entirely. The structure adapts to the trade type; the discipline is having a defined exit plan before entry, not negotiating mid-trade.
Frequently asked
What is a take profit ladder?
A multi-stage exit strategy that closes portions of an open position at successive target levels (typically TP1 at 1R, TP2 at 2R, TP3 at 3R or trailed). It locks in partial profit at the first target while leaving residual size to capture larger continuation moves.
What does 1R mean in TP1?
1R is one times the trade’s stop distance in price terms. If the stop is 50 pips below entry, 1R above entry is 50 pips of profit. TP1 at 1R means the first target sits at a profit equal to the dollar risk on the position, often used as the level for the first partial exit and the move to breakeven on the stop.
Is a ladder always better than a single target?
On most strategies yes, because it captures both high-hit-rate small wins and rare full-extension large wins. On news event trades that resolve quickly, a single 1.5R exit can outperform a ladder because the move runs out before TP2 is reached. The structure should match the trade type.
What this means at the desk
Plan the exit before the entry. A trade without a ladder is a trade negotiated under fire.
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