Stop order meaning
A stop order is an instruction to open a trade only after the price moves to a level you choose, in the direction of the move. Until that level is reached, nothing happens. The order sits in the platform as a pending order, which is an order waiting for a condition.
The idea is simple. You do not want to buy at the current price. You want to buy only if the price rises to a certain point, because that rise would confirm the move you expect. A stop order automates that decision.
If you are new to order types, read about market orders first. A stop order turns into a market order once it triggers.
Buy stop and sell stop
| Order | Where you place it | What it does when triggered |
|---|---|---|
| Buy stop | Above the current price | Opens a buy (long) position |
| Sell stop | Below the current price | Opens a sell (short) position |
- Buy stop: you buy only if the price climbs to your level.
- Sell stop: you sell only if the price falls to your level.
This is the opposite of a limit order. A buy limit sits below the price and waits for a dip. A buy stop sits above the price and waits for a rise. If "long" and "short" are unfamiliar, see Long and short.
Pending orders in forex: how stop orders fit
MetaTrader and most forex platforms offer these main pending order types:
- Buy limit / sell limit: enter at a better price than now.
- Buy stop / sell stop: enter at a worse price than now, after the market moves your way.
- Buy stop limit / sell stop limit: a stop trigger that places a limit order instead of a market order. See Stop-limit orders.
Each pending order can carry its own stop loss, take profit and expiry time. Expiry options are explained in Order expiry.
Breakout entries
Traders often use stop orders for breakout entries. A breakout is when the price moves through a level it had not been able to cross, such as a recent high, a range boundary or a chart pattern line.
- A buy stop is placed a little above resistance (a level where the price stalled before).
- A sell stop is placed a little below support (a level where the price stopped falling before).
The order enters only if the break happens. The weakness is the false breakout: the price crosses the level, triggers your order, then reverses. A stop loss placed before the trigger limits that damage, but it does not remove it. For more on reading levels, see Chart patterns and Technical analysis.
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Precise definitions for experienced traders
- Trigger price side. In MetaTrader, a buy stop triggers when the ask reaches the stop price. A sell stop triggers when the bid reaches it. A wide spread can therefore trigger a sell stop earlier or a buy stop later than the chart line suggests, because charts usually show the bid. See Bid and ask.
- Execution after trigger. Once triggered, a stop order is executed as a market order at the next available price. It guarantees execution if liquidity exists, not the price.
- Minimum distance. Brokers can set a minimum distance between the current price and a pending order (often called the stop level), and a freeze zone where an order close to the price cannot be changed. These values vary by instrument; check them in the symbol specification in your platform.
- Stop order vs stop loss. A stop loss is a stop order that closes an existing position. A buy stop or sell stop opens a new one. The trigger and slippage mechanics are the same.
Slippage on triggers
Slippage is the difference between your stop price and the price you actually get. It is common with stop orders because they trigger in the middle of fast moves, exactly when prices change quickly.
Slippage is larger when:
- important news is released and volatility spikes;
- liquidity is thin, for example at session opens or around holidays;
- the market gaps, opening beyond your level after a weekend or a break. Your order then fills at the first available price, which can be far from your stop. See Price gaps.
Slippage can work in your favour, but on breakout stops it usually works against you. Details are in Slippage. To estimate how a worse fill changes your result, use the tools on Calculators.
Risk
Forex and CFDs are usually traded with leverage, which means a small price move can cause a large loss. A stop order does not reduce risk on its own. It only controls when you enter. Decide your position size and exit before the order triggers, and practise on a demo account first. See also Risk management.
Frequently asked questions
What is a stop order in simple words?
It is a pending order that opens a trade only after the price moves to your chosen level: above the market for a buy stop, below it for a sell stop.
What is the difference between a buy stop and a buy limit?
A buy stop is placed above the current price and enters on a rise. A buy limit is placed below the current price and enters on a fall.
Does a stop order guarantee my price?
No. After the trigger it becomes a market order, so the fill can differ from your level, especially during news or gaps.
Why did my sell stop trigger before the chart reached it?
Sell stops trigger on the bid, but buy stops trigger on the ask. If the spread widened, the price you see on the chart may not match the price that triggered the order.
Can I cancel a stop order?
Yes, while it is still pending and outside any freeze zone set for that instrument. Once triggered, it is an open position that you must close.