Order types: market, limit, stop — and when to use each
The five orders that cover 99% of what you will ever need, with the pitfalls of each.
- Market orders fill now at the current price; limit orders fill only at your price or better.
- Stop orders become market orders when a level is hit — including your stop loss.
- Slippage happens on stop and market orders around news; limits protect you from it.
Market order
"Buy now at whatever the price is." Instant, but around news releases the price can jump between your click and the fill. That gap is slippage.
Limit order
"Buy at 1.0800 or lower." You choose the price; the trade only fills if the market comes to you. No slippage, but no guarantee of a fill either.
Stop order (stop entry)
"Buy if price rises to 1.0900." Used to join a breakout. It becomes a market order when triggered, so slippage applies.
Stop loss
A stop order attached to an open trade that closes it at a loss you chose in advance. Non-negotiable for a beginner. Note that it is also a market order once hit — in a fast market you can be filled worse than your level. Some brokers offer guaranteed stop losses for a small premium.
Take profit
A limit order attached to an open trade that closes it at your target. Fills at your price or better.
OCO and trailing stops
One-cancels-other pairs a stop and a limit so that whichever fills first cancels the other. A trailing stop moves your stop loss up behind a winning trade by a set number of pips.
The cost of skipping this
Trading without a stop loss, or setting one and not understanding it can slip, is how a small loss becomes a large one.
Not investment advice. This is general information and education, written without knowledge of your circumstances. It is not a recommendation to buy or sell any instrument. Past performance is not a reliable indicator of future results. Trading leveraged products carries a high risk of losing money. Risk warning