How does stop loss/take profit benefit my trading?

<p id="isPasted">There are multiple advantages to using both trading strategies, particularly in conjunction with each other. The key advantage is that these orders together limit total risk when placing a trade. However, like all trading strategies, there are some setbacks.</p><p><br></p><p><strong>Advantages of take-profit orders</strong></p><ul><li>Traders don't need to track their trade through the day or second-guess themselves over how high (or low) an asset may go. This helps keep emotion out of the trade</li><li>Short-term traders can manage their risk because they can exit a trade the moment their planned profit target is reached. This means they don't have to risk a possible downturn</li><li>Take-profit orders can be placed at levels supported by technical analysis tools, such as chart patterns or money management systems</li><li>The automated nature of take-profit orders makes it easier to manage risk</li></ul><p><strong>Disadvantages of take-profit orders</strong></p><ul><li>Take-profit orders are executed at the pre-set price, regardless of the asset's behaviour. If it starts to break out higher, the order will still be executed, resulting in opportunity costs</li><li>Long-term investors using take-profit orders may reduce their risk, but this also reduces potential profits</li><li>Automating trades can be an excellent risk management tool, but it can also make traders lazy – so it's easier to make mistakes</li></ul><p><strong>Advantages of stop-loss orders</strong></p><ul><li>Stop-loss orders are a simple and intelligent way to manage the risk of loss on a trade. They also help to lock in a profit</li><li>Every investor can use stop-losses as part of their strategy, as they are easy to set and use</li><li>They add discipline to short-term trading and remove the emotions that often lead to converting a profitable position to a loss</li><li>They eliminate the need to continually monitor investments, which can be useful when you are away for extended periods</li></ul><p><strong>Disadvantages of stop-loss orders</strong></p><ul><li>If an asset suddenly gaps below or above the stop price, this triggers the order. This means the asset will be sold at the next available price, even if it's trading sharply away from the stop-loss level. For example, setting a stop-loss order at 5% for an asset which tends to fluctuate by 10% in a day is unlikely to be a sensible strategy</li><li>Traders can see their positions closed in a volatile market that rapidly reverses and resumes in a favourable direction. This can be avoided by combining it with a trailing stop. A trailing stop is an order whose stop price tracks the asset's movements and is set at a certain percentage/amount above or below the market price. Alternatively, you can pay a premium for a 'guaranteed stop', which as the name suggests guarantees a stop price</li><li>Long-term investors shouldn't worry about short-term market fluctuations in quality companies, instead regarding downturns as an opportunity to add to their positions</li><li>Stop-losses are not a cure-all for losses – poor investing decisions will still see you lose money, just at a slower rate. Every trade costs commission and small losses can mount up over time</li><li>Once you reach your stop price, your stop order converts into a market order. This means that the price you sell at can be different to the stop price when the market is moving fast. This includes when a position is held overnight – poor earnings results can see an asset open at the market below your stop price</li><li>There are sometimes assets for which you cannot place a stop order, including highly volatile penny stocks</li></ul>