Learning note · Orders · Basics
Market, limit and stop orders: what each one does
The main order types in plain language, how stop losses and take profits fit in, and why no order guarantees a price.
An order is an instruction to open or close a position. Different order types trade off certainty of getting filled against control over the price. Knowing which is which avoids some very common beginner surprises.
Market orders
A market order says "fill me now at the best available price". It is the simplest way in or out. The trade-off is that you do not control the exact price: in a fast market the fill can differ from the quote you saw, which is slippage.
Limit orders
A limit order waits for a better price than the current one. A buy limit sits below the market; a sell limit sits above it. It fills only at your price or better, but it might never fill if the price does not get there.
EUR/USD at 1.0850. Buy limit at 1.0820: waits for price to fall to 1.0820.
Stop orders
A stop order waits for a worse price than the current one, then becomes a market order. A buy stop sits above the market; a sell stop sits below it. People use stop orders to enter when price breaks through a level, or to exit when a trade goes wrong.
EUR/USD at 1.0850. Buy stop at 1.0880: triggers only if price rises to 1.0880, then fills at the next available price.
Because a triggered stop becomes a market order, it can fill worse than its level, especially over a gap. That is the most important thing to understand about stops.
Stop loss and take profit
These are exit orders attached to an open position:
- A stop loss is a stop order that closes the trade if price moves against you to a set level. It marks the point where your trade idea is wrong.
- A take profit is a limit order that closes the trade if price reaches your target.
Neither is a prediction. A target is not where price "will" go; it is simply where you have decided to leave. And a stop does not guarantee your maximum loss: in a gap it may fill beyond its level.
Pending orders and expiry
Limit and stop entry orders are both pending orders: they sit unfilled until triggered. Many platforms let you set them to expire at the end of the day or at a chosen time. An old pending order you forgot about can open a trade you no longer want, so review them regularly.
Common mistakes
- Confusing a buy limit with a buy stop and placing the order on the wrong side of the market.
- Assuming a stop loss caps the loss exactly. It usually does in calm markets, and often does not in a gap.
- Using a market order on a thin market or just before major news without expecting slippage.
- Moving a stop loss further away once the trade is losing. That turns a planned loss into an unplanned one.
A simple routine
- Decide the entry, the stop loss and the target before placing anything.
- Choose the order type that matches the plan: market to enter now, limit to wait for a better price, stop to enter on a break.
- Attach the stop loss at the same time as the entry, so the trade is never open without one.
The practice simulator uses market entries with an optional stop loss and take profit, and shows the stop and target prices before you confirm, so you can practise this routine.
Education, not advice. This note explains a concept with illustrative numbers. It is not a recommendation to trade. Currency trading carries risk, and losses can exceed expectations. See the risk disclaimer.