Two Categories of Orders
Every trade starts with an order. Understanding order types is essential for executing your strategy correctly and managing risk.
⚡ Instant Execution
Execute immediately at current market price
- Market Order (Buy/Sell)
⏳ Pending Orders
Execute when price reaches a specific level
- Buy Limit / Sell Limit
- Buy Stop / Sell Stop
- Stop Loss / Take Profit
- Trailing Stop
Market Orders
A market order buys or sells immediately at the best available price. It's the simplest and most common order type.
Market Order
Instant ExecutionWhat it does: Executes your trade immediately at the current market price.
When to use: When you want to enter or exit NOW, and price precision isn't critical.
Example
EUR/USD is trading at 1.0850 (ask price). You place a market buy order.
Result: You buy EUR/USD at approximately 1.0850 (might vary slightly due to slippage).
✅ Pros
- Guaranteed execution
- Simple and fast
- Best for fast-moving markets
❌ Cons
- Price not guaranteed (slippage)
- Wider spread during volatility
- May execute at worse price than shown
💡 About Slippage
Slippage is when your order executes at a different price than requested. In fast markets, the price might move between your click and execution. Usually 1-3 pips, but can be much more during news events.
Pending Orders (Limit & Stop)
Pending orders wait until price reaches your specified level before executing. They let you plan entries without watching the screen constantly.
Buy Limit
Below Current PriceBuy when price DROPS to this level
Use when: You believe price will dip before rising. "Buy the dip" strategy.
Sell Limit
Above Current PriceSell when price RISES to this level
Use when: You believe price will rise then fall. "Sell the rally" strategy.
Buy Stop
Above Current PriceBuy when price RISES to this level
Use when: You want to buy breakouts. "Buy strength" strategy.
Sell Stop
Below Current PriceSell when price DROPS to this level
Use when: You want to sell breakdowns. "Sell weakness" strategy.
🧠 Easy Memory Trick
LIMIT = Better price than current (buying cheaper, selling higher)
STOP = Worse price than current (buying higher, selling lower) - used for breakouts
Stop Loss: Your Safety Net
A stop loss automatically closes your trade at a predetermined loss level. It's the most important risk management tool in trading.
🛡️ Stop Loss
NON-NEGOTIABLEExample: Long Trade
If price drops to 1.0800, your trade automatically closes. Maximum loss = 50 pips.
🏆 EVERY trade must have a stop loss. No exceptions.
Where to Place Stop Loss?
✅ Good Stop Loss Placement
- Below support (for buy trades)
- Above resistance (for sell trades)
- Beyond recent swing highs/lows
- Based on ATR (Average True Range)
❌ Bad Stop Loss Placement
- Arbitrary round numbers
- Too tight (hit by normal volatility)
- At obvious levels (stop hunting)
- "I'll move it if price gets close"
⚠️ Never Move Stop Loss Against You
If you set a stop at -50 pips, don't move it to -70 pips "to give it more room." That's not trading, that's hoping. You already defined your maximum acceptable loss - honor it.
Take Profit: Locking in Gains
A take profit automatically closes your trade when it reaches your profit target. It removes the emotional "should I close now?" decision.
💰 Take Profit
When to Use Take Profit
- You have a specific target (resistance, fib level, etc.)
- You won't be watching the trade
- You want to remove emotion from exit decision
Risk/Reward Consideration
Your take profit should give you a favorable risk/reward ratio:
Trailing Stop: Riding the Trend
A trailing stop is a dynamic stop loss that follows price as it moves in your favor. It lets profits run while protecting gains.
📈 Trailing Stop
How It Works
You buy EUR/USD at 1.0850 with a 30-pip trailing stop.
Key Point: Trailing stops only move in your favor. Once the stop moves up, it never moves back down.
💡 When to Use Trailing Stops
- Strong trends - Let winners run
- You can't watch the trade - Automatic profit protection
- You tend to exit too early - Removes emotional exits
Don't use too tight a trailing stop (e.g., 10 pips) - normal price fluctuations will trigger it.
Common Order Mistakes
No Stop Loss
"I'll watch it and close manually." Famous last words. One runner can wipe out months of gains.
Fix: Always set stop loss BEFORE entering.
Moving Stop Loss Away
Price approaches your stop, you panic and move it further away. Now you're risking more than planned.
Fix: Accept the loss. It was already calculated.
Confusing Limit and Stop Orders
Placing a buy stop when you meant buy limit. Order triggers immediately or at wrong level.
Fix: Double-check before confirming. Practice on demo.
Stop Loss Too Tight
Setting 10-pip stop loss on a pair that moves 15 pips in normal noise. You get stopped out constantly.
Fix: Use ATR or swing points to set appropriate stops.
Market Orders During News
Placing market order during NFP release. Massive slippage, filled 20+ pips from expected.
Fix: Avoid market orders during high-impact news.
Quick Reference Table
| Order Type | Execution | Price Level | Use Case |
|---|---|---|---|
| Market | Instant | Current price | Enter now |
| Buy Limit | Pending | Below current | Buy the dip |
| Sell Limit | Pending | Above current | Sell the rally |
| Buy Stop | Pending | Above current | Buy breakout |
| Sell Stop | Pending | Below current | Sell breakdown |
| Stop Loss | Exit only | Against position | Limit loss |
| Take Profit | Exit only | In profit direction | Lock profit |
| Trailing Stop | Dynamic exit | Follows price | Ride trends |
Key Takeaways
Market orders execute instantly but price isn't guaranteed. Use for immediate entry/exit.
Limit orders = better price than current. Stop orders = worse price (for breakouts).
Stop loss is mandatory - set it BEFORE entering. Never move it further away.
Take profit removes emotion. Set it at logical levels with good risk/reward (minimum 1:1).
Trailing stops help ride trends. Use in strong directional moves, not choppy markets.