An order is the instruction you give the platform: buy or sell, how much, and at what price. The order type decides when that instruction turns into a trade and what price you are likely to get. Five order types cover nearly everything a new trader needs.
What you will learn
- How a market order fills, and why the price can differ from the one on screen
- When to use a limit order and when to use a stop order, including buy stop vs buy limit
- How a stop loss and a take profit close a trade while you are away from the screen
- Why a stop loss can close a trade at a worse price than the one you set
Market orders: trade now at the next price
A market order buys or sells straight away at the next available price. You choose the size and the market chooses the price. A buy fills at the ask, the higher of the two quoted prices, and a sell fills at the bid, as you saw in spreads and trading costs.
Say EUR/USD is quoted 1.0850 / 1.0851 and you send a market order to buy 0.5 lots. If nothing moves, you fill at 1.0851. If the price ticks up while the order travels, you might fill at 1.0852. That one-pip difference is slippage: the gap between the price you expected and the price you got. On 0.5 lots of EUR/USD one pip is worth $5, so this slippage costs you $5.
Use a market order when getting in or out matters more than the exact price, including when you close a trade by hand.
Limit orders: your price or better
A limit order waits for a price you choose and fills only at that price or a better one. A buy limit sits below the current price and a sell limit sits above it. You use one when you expect price to come back to a level before it moves your way.
EUR/USD trades at 1.0851 and you think 1.0820 is a level where buyers have stepped in before. You place a buy limit at 1.0820. If the ask falls to 1.0820, the order fills there or lower. If price turns at 1.0825 and climbs 80 pips, the order never fills and you miss the move. A limit controls your price but gives you no certainty of a fill.
Stop orders: only once price breaks a level
A stop order waits until price reaches a level you set, then becomes a market order. A buy stop sits above the current price and a sell stop sits below it. Traders use a buy stop to enter only after price has broken through a level, such as a recent high.
EUR/USD has turned lower at 1.0880 three times this week. You place a buy stop at 1.0882, two pips above that level. If the ask reaches 1.0882, the order triggers and fills at the next available price, which in a fast move could be 1.0884. If price never gets there, the order never triggers.
Buy stop vs buy limit: which one do you need?
Both orders buy and both wait for a price. The difference is where they sit and what you expect to happen.
- A buy limit sits below the current price. You expect a dip first, then a rise.
- A buy stop sits above the current price. You expect a rise to continue once it clears a level.
- A sell limit sits above the current price. You expect a rally to fail and turn down.
- A sell stop sits below the current price. You expect a fall to continue once it breaks a level.
A limit asks for a better price than the current one. A stop accepts a worse price in exchange for seeing the move start.
Stop loss and take profit: orders that close a trade
A stop loss is a stop order that closes your position if price moves against you by an amount you chose in advance. A take profit is a limit order that closes it once price reaches your target. You can attach both to one trade, and when one closes it, the other is removed.
Take one trade from start to finish. You buy 0.5 lots of EUR/USD at 1.0851, so each pip is worth $5.
- You set a stop loss at 1.0821, 30 pips below your entry. If it fills at that level, the loss is 30 × $5 = $150.
- You set a take profit at 1.0911, 60 pips above your entry. If it fills, the gain is 60 × $5 = $300.
- Trading costs from lesson 4 come off whichever result you get.
Setting the stop first tells you the loss you are planning for, and the position size calculator turns that dollar figure and the stop distance into a lot size. The ratio between the two distances here, 60 pips of target for 30 pips of stop, is 2:1, and the risk-reward and expectancy lesson shows how to use it.
Why a stop loss can fill at a worse price
A stop loss becomes a market order when it triggers, so it fills at the next available price. In a fast market, or when price gaps over a weekend, that price can be well past your level. Suppose EUR/USD closes on Friday at 1.0840 and opens on Monday at 1.0810. Your stop at 1.0821 fills near 1.0810, so the loss is about 41 pips, or $205, where you had planned for $150.
Some platforms offer a stop-limit order, which sets the worst price you will accept. If price gaps past that price, the order does not fill and you are still in the losing trade. Some also offer a trailing stop, which follows price at a fixed distance as the trade moves in your favour and stays put when it moves against you. Use either one only if your platform offers it, and try it on a small size first.
How orders fit the CMC Funded rules
On a CMC Funded account the daily loss limit is measured on equity, so the floating loss on an open trade counts against it before you close. On a $10,000 Classic account that limit is $500. The trade above risks $150 at its stop, and even the $205 weekend fill stays inside it. Holding positions overnight and over the weekend is allowed, with holding costs, so plan for a loss somewhat bigger than the stop in case of a gap. The rules page has the limits for every account.
Check your understanding
EUR/USD trades at 1.0851. You want to buy only if price falls to 1.0830. Which order do you use?
A buy limit at 1.0830. It sits below the current price and fills at 1.0830 or lower.
Why can a stop loss set at 1.0821 close your trade at 1.0810?
When the stop triggers it becomes a market order. If price gaps past 1.0821, the next available price is lower, and that is where the order fills.
You hold 0.5 lots of EUR/USD with a take profit 60 pips away. What is the gain before costs if it fills?
60 pips × $5 per pip = $300.
Key points
- A market order fills now at the next available price: a buy at the ask, a sell at the bid.
- A limit order fills only at your price or better, so it may never fill.
- A stop order triggers when price reaches your level and then fills at the next price, which can be worse.
- A stop loss and a take profit are a stop order and a limit order attached to a trade you already hold.
- Gaps and fast markets can push a stop loss past its level, so leave room in your daily loss limit.
Next lesson: Long and short
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