Forex Order Types: Market, Limit, Stop, Stop-Loss and Take-Profit

Forex traders use three basic order types: a market order fills immediately at the current price, a limit order waits to buy lower or sell higher than the current price, and a stop order waits for price to move through a level and then trades in that direction. A stop-loss is a stop order that closes a losing trade, and a take-profit is a limit order that closes a winning one. Knowing how each fills, especially in fast markets, is part of managing risk.

Market orders

A market order says: "fill me now at the best price available." Buys fill at the ask, sells at the bid (see Bid, Ask and Spread).

• Good for: entering or exiting when you need certainty of being filled.
• Risk: in fast markets you may get a different price from the one on screen. That difference is slippage. It can go against you or, at an honest broker, sometimes in your favour.

Pending orders: limit and stop

A pending order waits until price reaches a level you set.

Order	Placed	Use
Buy limit	Below the current price	Buy a pullback at a better price
Sell limit	Above the current price	Sell a rally at a better price
Buy stop	Above the current price	Buy a breakout as price rises
Sell stop	Below the current price	Sell a breakdown as price falls

A simple way to remember it: limit = better price, stop = worse price but confirmation. A limit order fills at your price or better, but may never fill. A stop order is triggered at your price and then fills at the market, which may be worse.

Some platforms also offer a stop-limit: once the stop price is hit, a limit order is placed instead of a market order. It protects you from bad fills but may leave you unfilled if price jumps past your limit. Do not use stop-limits for protective stops; an unfilled stop-loss is no stop at all.

Stop-loss and take-profit

These are orders attached to an open position.

• Stop-loss (SL): closes the trade if price moves against you to a set level. On a long it is a sell stop below the entry; on a short it is a buy stop above.
• Take-profit (TP): closes the trade at a target. On a long it is a sell limit above; on a short it is a buy limit below.

Remember which price triggers what: a long position's stop is hit when the bid reaches it; a short position's stop is hit when the ask reaches it. Because most charts show the bid, a short's stop can be hit when the chart line seems a few pips away, especially when spreads widen.

Trailing stops

A trailing stop follows price at a fixed distance as the trade moves in your favour, and stays put when it moves against you. A 50-pip trailing stop on a long bought at 1.1000 sits at 1.0950; if price rises to 1.1100, the stop rises to 1.1050 and locks in 50 pips.

Two cautions: on many platforms (such as MetaTrader) a trailing stop runs on your computer or terminal, so it only moves while the platform is open; and a fixed-pip trail ignores volatility. Many traders trail by a multiple of ATR instead, covered in Forex Indicators.

Order duration

• Good till cancelled (GTC): stays until filled or cancelled.
• Day order: cancelled at the end of the trading day.
• Good till date/time: cancelled at a time you choose.

Old pending orders are a common source of surprise trades. Review them before news releases and weekends.

OCO orders

One-cancels-the-other (OCO) links two orders: when one fills, the other is cancelled. Traders use it for a breakout either way, for example a buy stop above a range and a sell stop below it. Not every platform offers OCO for entries, but stop-loss and take-profit on the same position work in the same way.

Slippage, gaps and guaranteed stops

A triggered stop-loss becomes a market order. In normal conditions it fills at or very near your level. In three situations it can fill far away:

1. News releases: prices jump between levels with no trades in between.
2. Weekend gaps: Monday's first price can be far from Friday's close.
3. Shocks: such as the Swiss franc move in January 2015, covered in Margin Call and Stop-Out.

Some brokers offer guaranteed stop-loss orders (GSLO) that fill at your exact level whatever happens. They usually cost a premium, charged when the stop is triggered or built into a wider spread, and may need to be placed a minimum distance from the price. For a beginner holding trades through news or weekends, they can be worth the cost.

Good order habits

• Place the stop-loss with the entry order, not "in a minute".
• Never widen a stop once a trade is open to avoid taking the loss. Move it only in the direction that reduces risk.
• Check lot size, direction and pair before clicking; mistakes in these three cause more losses than bad analysis.
• Use pending orders so you do not have to watch the screen at 02:00 PKT.