Orders & ExecutionStop Entry OrderStop Market Order
Stop Order
An order that converts into a market order once price trades through a specified trigger level.
What Stop Order means
A stop order sits dormant until the market touches its trigger price, at which point it is released as a market order and filled at whatever price is then available. Unlike a limit order it is placed on the far side of the market in the direction of travel: a buy stop is set above the current price and a sell stop below it. That orientation makes stop orders the natural tool for breakout entries and for protective exits, since both need to act only once price has already moved against or beyond a chosen level.
Because the released order is a market order, the trigger price and the fill price are two different things. In fast markets, at the weekly reopen, or through a data release, a stop can fill several pips away from its level, and there is no upper bound on that gap. Some platforms offer a stop-limit variant, which releases a limit order instead and therefore caps the fill price, at the cost of the order potentially not filling at all if price runs straight through.
Traders should also remember that stops are triggered by the side of the quote that would close or open the position: a buy stop by the ask, a sell stop by the bid. During periods of spread widening the ask can reach a buy stop while the visible bid-based chart is still some distance below it, which explains a large share of complaints about premature triggering.
Worked example
With GBP/USD at 1.2700 a trader places a buy stop at 1.2750 to catch a breakout; when the ask prints 1.2750 the order is released and might fill at 1.2752, two pips of slippage worth about USD 20 on a standard lot.
Related terms
- Buy StopA pending order to buy placed above the current market price, triggered when the ask reaches that level.
- Sell StopA pending order to sell placed below the current market price, triggered when the bid reaches that level.
- Stop LossA resting order that closes an open position once price reaches a set level, capping the loss on that trade.
- Limit OrderAn order to buy at or below a stated price, or sell at or above it, guaranteeing price but not execution.
- SlippageThe difference between the price a trader expected on an order and the price at which it was actually executed.
Frequently asked questions
What does Stop Order mean in forex trading?
An order that converts into a market order once price trades through a specified trigger level.
How does Stop Order work in practice?
Because the released order is a market order, the trigger price and the fill price are two different things. In fast markets, at the weekly reopen, or through a data release, a stop can fill several pips away from its level, and there is no upper bound on that gap. Some platforms offer a stop-limit variant, which releases a limit order instead and therefore caps the fill price, at the cost of the order potentially not filling at all if price runs straight through.
What is an example of Stop Order?
With GBP/USD at 1.2700 a trader places a buy stop at 1.2750 to catch a breakout; when the ask prints 1.2750 the order is released and might fill at 1.2752, two pips of slippage worth about USD 20 on a standard lot.
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