Target Order

A target order is an order placed at a predefined favourable price to book profit automatically when the market reaches it — a sell limit above the entry for a long position, or a buy limit below the entry for a short. Together with the stop-loss, it brackets a trade: one order defines where the idea is wrong, the other where it has paid enough.

Because a target is a limit order, it fills at the stated price or better, with essentially no adverse slippage — the opposite of a stop, which fills at the market’s mercy. Some brokers bundle entry, stop and target into a single bracket order; algo platforms manage the pair as OCO (one-cancels-other) logic, so a stop hit cancels the target and vice versa.

Example

A system shorts a BANKNIFTY option at ₹240 premium, with a stop at ₹290 and a target at ₹140 — risking ₹50 to make ₹100 per unit, a 1:2 risk-reward. If the premium decays to ₹140, the buy limit fills, booking ₹100 × 35 (one lot) = ₹3,500 and cancelling the stop. Hypothetical, before costs.

Why it matters

Fixed targets versus trailing exits is one of the oldest strategy design debates: targets cap winners but raise win rate and reduce give-back; trailing lets winners run but returns profit in reversals. For systematic traders the answer is empirical — backtest both exit styles on the same entries and compare expectancy and drawdown, then let the rules, not the mood of the day, decide.

In INDfolio AI, target and stop rules are part of the strategy definition and simulated together in every backtest.