Pending Stop and Limit Orders
A pending order is placed in advance, either above or below the current price, and it is activated only when the quote of the traded asset reaches the price specified in the pending order.Contents:
The advantage of pending orders is that they can be placed and you can turn off your terminal, since these orders are stored on the broker’s server. When the price reaches the order, it is activated. You can also set an expiration date and time for any pending order when placing it. Once the expiration time is reached, the order will be removed, provided it has not been executed (i.e., turned into a market order), meaning the price never touched it.
There are two types of pending orders: stop and limit. Below, we will examine them in more detail and learn how to place them correctly.
Stop Orders – Buy Stop and Sell Stop
Stop orders should not be confused with stop-loss orders — they are not the same! A stop order is a pending market entry at a predetermined price. Stop orders are often called breakout orders (entry on a breakout). Now we will look at how they work, and you will understand why they are called that.Buy Stop
A buy stop order is placed above the current Ask price. The Ask quote moves upward, and as soon as it reaches the order, it is activated. At this point, the pending buy stop order becomes a market order. Upon activation, the spread is applied, resulting in a floating loss equal to the spread. Such an order is closed at the Bid price. Therefore, when placing a buy stop order, you should always take the spread into account and add it to the order price.
Sell Stop
For a pending sell stop order, everything works in the opposite way, with a small adjustment. It is placed below the current price. The Bid quote moves downward, and as soon as it reaches the order, it is activated and becomes a market order. The spread is applied when closing the order, which is done at the Ask price. Accordingly, when placing a sell stop order, you do not need to add the spread to the order price.This is the main difference between how buy stop and sell stop orders work. Now it becomes clear why they are called breakout orders — they are activated when the price breaks through the level of your order.
Limit Orders – Buy Limit and Sell Limit
Limit orders allow you to make a pending market entry at a predetermined price. When the price reaches the order, it is activated. Just like stop orders, limit orders can be activated even if you turn off your terminal, as they are executed on the broker’s server. Let’s take a closer look at the types of limit orders.Buy Limit
A buy limit order is placed below the current price, and as soon as the Ask quote reaches the order, it is activated and an open long position is created. Upon activation, the spread is applied for the order. The order is closed at the Bid price.
Sell Limit
A sell limit order is placed above the current price. As the Bid quote moves upward and reaches the order, it is activated, and an open short position is created. The order is closed at the Ask price, and the spread is applied at that moment. This should be taken into account when setting a stop loss and take profit.
Stop Loss
A stop loss is designed to protect your trading position from losses if the price moves in an unfavorable direction. A stop loss can be set for both market orders and pending orders. The stop loss is stored on the broker’s server and is activated even if the terminal is turned off. As soon as the price reaches the stop loss level, your order will be closed automatically. You should always remember that for buy orders, the stop loss is triggered by the Bid quote, while for sell orders, it is triggered by the Ask quote.Take Profit
Take profit is designed to close an order at a predetermined profit level. It can be set for both market orders and pending orders. The take profit is stored on the broker’s server and does not require the terminal to be continuously running. When the price reaches the take profit level, your order will be closed automatically. Just like with a stop loss, you should remember that for buy orders, the take profit is triggered by the Bid quote, while for sell orders, it is triggered by the Ask quote.
Comments
Jdj 2025-07-02 21:47:55 #
The forex market is ideal for trading with limit orders, especially when working with flat currency pairs. The key is not to place stop losses too close.
ox4ge 2025-09-20 01:11:58 #
Limit orders also work very well on trending currencies – the key is to place them at the end of a correction.
Ru