Stop Order
Order TypesAn order to buy above or sell below the current market price. Stop orders become market orders once the trigger price is reached.
What Is a Stop Order?
A stop order (or stop entry order) is a pending order that triggers when the price moves beyond a specified level. A buy stop sits above the current price and triggers when price rises to that level. A sell stop sits below the current price and triggers when price falls to that level. Once triggered, a stop order becomes a Market Order and fills at the best available price.
Stop Order Examples
EUR/USD is at 1.0850 and you believe a break above 1.0880 will start a strong uptrend. You place a buy stop at 1.0880. If the price reaches 1.0880, your order triggers and you enter Long. If the price never reaches 1.0880, the order stays pending. This approach lets you enter trades only when price confirms your analysis.
Stop Orders vs. Stop-Loss Orders
Stop orders and Stop-Loss orders both use the same trigger mechanism, but they serve different purposes. A stop order opens a new position (entry). A stop-loss order closes an existing position (exit to limit losses). Stop orders are popular with breakout traders who want to enter when price moves decisively through a key level.
Related Terms
Stop-Loss
An order that automatically closes a position at a predetermined price to limit losses. The most important risk management tool in forex trading.
Stop-Limit Order
A two-part order that combines a stop trigger with a limit price. Once the stop price is hit, a limit order is placed instead of a market order.
Market Order
An order to buy or sell immediately at the best available price. Market orders guarantee execution but not a specific price.
Trailing Stop
A stop-loss that moves automatically in the direction of profit as the market moves in your favor. It locks in gains while staying a fixed distance from the current price.