Limit Order vs Stop Order: Whats the Difference?


A limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specific price. Please keep in mind that depending on market conditions, there may be a difference between the price you selected and the final price that is executed (or “filled”) on your trading platform. If the price of the orders is too tight, they could be constantly filled due to market volatility. Buy Stop Limit Order prices should be at levels that allow for the price to rebound profitably while still protecting you from excessive loss.

share price

Consider the price movement of a stock ABC that is poised to break out of its trading range of between $9 and $10. Let’s a say a trader bets on a price increase beyond that range for ABC BTC and places a buy stop order at $10.20. Once the stock hits that price, the order becomes a market order and the trading system purchases stock at the next available price. Stop-Limit orders are an order type to limit buy/sell a futures contract once the Mark Price hits your specified Stop Price. It is a conditional order which only becomes active once the Stop price has been hit. Once the Stop price has been hit, a limit buy/sell order XLM will be activated based on your precise input.

What Are the Pros and Cons of Limit and Stop Orders?

Another of stop-loss is a stop-loss limit order, which will close your trade only at the stop-loss price or better. In the current market, it’s more difficult to find great stocks to trade and execute your plan… Stocks are… Stop-limit orders can be useful for active traders, especially those who trade penny stocks. Analyzing stock charts is a great way to determine these key levels. You can use the horizontal line tool on your charting platform to look for areas where the market historically turns around. You enter a stop-limit sell order to sell 100 shares of F at a stop of $19.50 with a limit of $19.25, selecting GTC in the order details.

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Buy limit orders are filled at a designated price or better; buy stop orders are filled at the best available price. Falls to this level, the order will be filled, closing out the position for a 25 pip gain. Upon the buy limit being filled at 1.2009, a new long position becomes active. Please try again later or contact We apologize for the inconvenience.

Analyze Charts

Besides, a stock with high liquidity may not require such an order. If the shares are highly illiquid, consider lowering the size of your position as a risk management approach. Any and all information discussed is for educational and informational purposes only and should not be considered tax, legal or investment advice. A referral to a stock or commodity is not an indication to buy or sell that stock or commodity. Ross Cameron’s experience with trading is not typical, nor is the experience of traders featured in testimonials. Becoming an experienced trader takes hard work, dedication and a significant amount of time.

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A stop order is an order type that can be used to limit losses as well as enter the market on a potential breakout. Buy stop orders can also be used to protect against unlimited losses of an uncovered short position. These are just a few of the more common reasons investors may use different order types in their strategies. As with all things related to investing in the stock market, it can get fairly complicated quickly. One of the simplest methods for placing a stop-loss order when buying is to put it below a «swing low.» A swing low occurs when the price falls and then bounces.

One of the common applications occurs when it is used to buy a buy at stop at a profitable price anticipating an uptrend. One thing to keep in mind is that you cannot set a plain limit order to buy a stock above the market price because a better price is already available. So if you wanted to purchase shares of a $100 stock at $100 or less, you can set a limit order that won’t be filled unless the price that you specified becomes available. The short seller can place their buy stop at a stop price, or strike price either lower or higher than the point at which they opened their short position. An investor looking only to protect against catastrophic loss from significant upward movement will open a buy stop order above the original short sale price.

So you may pay a minimum order fee to your broker for each trade. Your stop-limit order may get filled in three separate trades over multiple days due to the lack of liquidity. You can use the order to exit your short position if the price rises. Say you set a basic stop-loss order to sell 100 XYZ shares if the price declines to $10. The order means you’ll sell 100 shares at the market — no matter what the price is.

With a Buy Limit Order the limit price is always lower than the current market price, not higher. The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. , offers investment services and products, including Schwab brokerage accounts. Its banking subsidiary, Charles Schwab Bank, SSB , provides deposit and lending services and products. Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons.


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A Buy stop order is set above the current price and is triggered when the asset value rises to the trader’s set level. To activate it, you need the chart to move down and an upward reversal. During an upward movement, a long position is opened when the set level is crossed.

  • Note that in some cases only a portion or none of your order may execute if shares aren’t available at certain prices .
  • Conversely, with the sell limit order at $142, if the stock were to open at $145, the limit order would be triggered and be filled at a price close to $145–again, more favorable to the seller.
  • For instance, trendline analysis may reveal an ongoing “up channel,” which you could then use as a basis to get long the market.
  • Once the price of the instrument they are trading reaches a certain level, the order is executed.
  • The order gets triggered if the price were to reach that level.

If the price keeps dropping without your order being filled, your loss continues to grow. If you buy a stock at $20 and place a stop-loss order at $19.50, your stop-loss order will execute when the price reaches $19.50, thereby preventing further loss. If the price never dips down to $19.50, then your stop-loss order won’t execute.

A GTC order remains active in the market until you decide to cancel it. Therefore, it isyour responsibility to remember that you have the order scheduled. This is the tradeoff when using a limit order instead of a market order. Stop losses are extremely useful if you don’t want to sit in front of your monitor all day worried that you will lose all your money. As you can see, a stop order can only be executed when the price becomes less favorable to you.

So, instead of buying in at the market, we place a buy stop order above the resistance level, in this example, at $62.00. One of those basic order types, included even in web-based discount brokerage platforms, is the buy stop order. Your average trading platform will have anywhere from a few basic types of orders, to dozens of order types, depending on how advanced of a platform. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey.

short position

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What is a Stop order?

A stop order is a pending order placed on the market if the market price reaches the trader’s specified level. This one is typically used to follow a trend.

A market order is an instruction to open or close a position. It indicates which action should be performed, the transaction volume, the asset value, and other parameters. At the same time, I see that, historically, there is a strong support level at 1.1600, and if the asset falls, it is likely to rebound from that level.


https://www.beaxy.com/rs anticipate that the price of the asset will keep rising. In a short sale, investors borrow shares from a lender (brokerage, bank, etc.) for a certain period of time, and sell the shares in the open market. They bet the price will decline in the time period, and they can buy the same number of shares at a lower price before returning them to the lender. They would profit from the difference between the sale price and the cheaper repurchase price.

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