Types of orders
Day 03 of 26 · 9 min read · By DT Terminal
An order tells your broker what to do and at what price. A market order fills now at the best price available, a limit order waits for a better price, and a stop order waits for price to break through a level. This lesson shows when each one fills and how stop loss and take profit protect a position.
Unlock the full lesson in the app
Worked examples, the quiz and the interactive tools are in the app. Free account.
Market orders
An order tells your broker to buy or sell, how much, and at what price. Every order type answers one question: when should this fill?
A market order answers "now": it fills straight away at the best price on offer. You are sure to get in, but not of the exact price. In a fast market, around news or a session open, the fill can be a little worse. That difference is slippage.
The other four types are pending orders. They wait at a price you choose. If price never reaches them, they never fill and cost nothing.
Bid, ask and the spread
There are always two prices. The ask is what you pay to buy. The bid is what you get to sell. The gap is the spread, so every trade opens slightly negative.
Buy orders fill at the ask, sell orders fill at the bid. A buy limit or buy stop triggers when the ask reaches its price. A sell limit or sell stop triggers when the bid does.
Go deeper
On EURUSD the spread is often under 1.5 pips on a standard account. It widens around big news releases and at the daily rollover, 17:00 New York time, when fewer participants are quoting.
A long closes by selling, at the bid, so the chart shows exactly what closes it. A short closes by buying, at the ask. The last worked example shows what that can do to a short's stop.
The four pending orders
Two choices make every pending order: buy or sell, and a price above or below the market now. Two times two gives four orders.
| Order | Where it sits | It fills when | Use it when |
|---|---|---|---|
| Market buy or sell | Fills now at the current price | Immediately: a buy at the ask, a sell at the bid | You want in immediately |
| Buy limit | Below the current price | The ask falls to it | You want to buy a pullback into a level |
| Sell limit | Above the current price | The bid rises to it | You want to sell a rally into a level |
| Buy stop | Above the current price | The ask rises to it | You only want to buy if price breaks up through a level |
| Sell stop | Below the current price | The bid falls to it | You only want to sell if price breaks down through a level |
Interactive tool
Order picker
This interactive tool runs in the app, with your own numbers.
Place all four in the backtester
EURUSD, set one of each around the price, and play forward to see which fills first.Go deeper
A buy limit waits for price to come down to you. A buy stop waits for price to go up through a level. A sell limit sells higher than now, and a sell stop sells only once price breaks lower.
Once it triggers, a stop order becomes a market order, so in a fast break it can fill a little past your price. A limit order fills at your price or better, but price can turn just before it and leave you out of the trade.
MT5 also offers buy stop limit and sell stop limit orders: a stop that places a limit order once it triggers. You can leave them alone while you learn the four above. The backtester takes the same four pending orders as MT5, so the habit carries over.
Stop loss and take profit
A stop loss and a take profit close a position you hold: the stop where your idea is proven wrong, the target where you planned to get paid.
They are pending orders, pointing the other way:
| Position | Stop loss | Take profit | Closes at |
|---|---|---|---|
| Long | Below entry (a sell stop) | Above entry (a sell limit) | The bid |
| Short | Above entry (a buy stop) | Below entry (a buy limit) | The ask |
A stop loss is not a guaranteed price. If the market gaps past it, it fills at the first price available.
DT Terminal ChartsEURUSD · H1Write it down as a rule
Go deeper
On a long, the stop is a sell stop below entry and the target a sell limit above. On a short, the stop is a buy stop above and the target a buy limit below. In MT5 you can type both into the New Order window (F9) before you place the trade, and drag them on the chart afterwards.
A gap past the stop happens over a weekend or on a big release, and the fill can be worse than where you set it. When you write up a trading day in the journal, you can name the rule you broke, so a trade placed without its stop is counted rather than forgotten.
Worked example: a buy limit
Round numbers so the arithmetic is easy to follow. Not trade ideas.
Worked example
Example 01: Buying a pullback on EURUSD with a buy limit
The worked example, with every number walked through, is in the app.
Go deeper
When the order is placed, EURUSD trades at 1.08720 bid, 1.08732 ask. Stop loss 1.08300, take profit 1.08900, size 0.10 lots, where each pip is worth $10 per lot.
Once filled, the stop and target close the long at the bid. This is the trade drawn in the stop loss figure in the previous chapter.
Worked example: a sell stop
Worked example
Example 02: Selling a breakdown on XAUUSD with a sell stop
The worked example, with every number walked through, is in the app.
Go deeper
Gold has bounced off support at 3,340.00 three times and trades at 3,352.40 bid, 3,352.70 ask, a $0.30 spread. A touch of the level is not enough to trigger the order. Stop loss 3,346.00, take profit 3,322.00, size 0.10 lots. On a 100 ounce contract that is $10 for every $1 gold moves.
A fill lower than the order price is worse for a sell. Contract sizes vary by broker, so check the symbol's specification in MT5 before you size a gold trade.
Worked example: a short stopped by the ask
Worked example
Example 03: A short stopped out by the ask
The worked example, with every number walked through, is in the app.
Switch on the ask line (F8 in MT5), and give a short's stop some room above the level for a wider spread.
Go deeper
You are short EURUSD from 1.08500 with a stop loss at 1.08600, 10 pips above, on 0.10 lots. The highest bid candle on your chart reaches 1.08540. The loss is the 10 pips you planned for. It just arrived from a chart that looked safe.
The ask line is in your chart's properties. With it on, you can see the price a short closes at.
Check yourself
Quick review · 0 of 0