Stop order

A stop order waits until price touches a level you choose, then executes at the next available price. It triggers when the market moves through your level in the direction you specify:

• A buy stop is placed above the current price and triggers if price rises to it.
• A sell stop is placed below the current price and triggers if price falls to it.

This is the opposite of a limit order, which waits for a better price than the current one (buy below, sell above).

Two uses

1. Entering a trade when price breaks through a level, for example a buy stop just above resistance to catch a breakout.
2. Exiting a trade to limit a loss: a stop-loss is simply a stop order attached to an open position.

Example

Illustrative figures: USD/JPY is at 149.60 and has turned lower at 150.00 several times. You place a buy stop at 150.15 for 0.2 lots. If price trades up to 150.15, the order triggers and you are filled at the next available price, perhaps 150.16, or higher if the market is moving fast. If price never reaches 150.15, no trade is opened.

Practical notes

• Slippage: because a triggered stop becomes a market order, the fill can differ from your level, especially around news or over a gap.
• Stop-limit orders (available on MetaTrader 5 and some other platforms) place a limit order once the stop price is reached. They avoid filling at a much worse price, but may not fill at all.
• Which side triggers: on most platforms buy stops trigger on the ask and sell stops on the bid, so a wide spread can trigger an order before the chart's bid line reaches it.

See our guide to order types.