A resting order that closes a winning trade at a predefined target price.
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.
A take-profit is usually a limit-order placed at your target. Together with a stop-loss it defines your risk-reward-ratio before the trade starts. Placing it in advance removes the temptation to move targets in the moment.
Example: entry $40, stop $38, take-profit $46. Risk is $2 and reward is $6, a 3R target. If the stop is hit 60% of the time this is still a profitable setup.