Order Types and When to Use Each

Four order types get a position open and two protect it once it is. The list is short; what matters is knowing which one expresses the plan you actually have.

Market orders

A market order says: fill me now, at whatever is available. It is the right choice when being in the trade matters more than the exact entry price.

What it does not promise is the price you saw. Between your click and the fill, the quote can move — that difference is slippage, and it is usually a fraction of a pip in a quiet market and much larger around a release.

Buy limit, sell limit, buy stop, sell stop

Pending orders wait for a price instead of taking the current one. Which of the four you want falls out of one question: is your entry above or below where price is now, and are you buying or selling.

The pattern: a limit order buys lower or sells higher than now — it wants a better price. A stop order buys higher or sells lower — it wants confirmation, and accepts a worse price to get it.

A pending order also removes you from the screen, which is often its real value: the level and the size were decided calmly, and the order executes them whether or not you are watching or feeling brave.

Stop loss and take profit

A stop loss closes the position at a loss if price reaches a level. A take profit closes it at a gain. Both are attached to the position and both work while you are away.

A stop loss is not a number picked for comfort. It goes where the reason for the trade stops being true — under the swing low you are buying from, beyond the level you expected to hold. If that distance risks more than you are willing to lose, the answer is a smaller position, not a nearer stop.

Remember which side of the spread closes you. A long is closed at the bid, so a long is stopped when the bid touches your level. Placing a stop within a pip or two of an obvious level, on a pair with a wide spread, is how a trade gets closed on noise.

Trailing stops and their limits

A trailing stop follows price at a fixed distance when the trade moves in your favour, and stays put when it moves against you. Set 30 pips and it sits 30 pips behind the best price reached.

Two things it genuinely does:

• Locks in a gain without a decision. Once price has moved far enough, the trail is above break even and the trade cannot lose.
• Removes the temptation to close early, by making the exit a rule rather than a feeling.

Two things it does not:

• It cannot tell a pullback from a reversal. A trail tight enough to protect profit is tight enough to be hit by ordinary retracement.
• It does not run while your platform is closed, on some brokers. Server-side trailing is common but not universal — check yours rather than assuming.

A trailing stop is a way of exiting, not a way of being right. It works when the distance is set from how far the pair normally pulls back, which is a measurement from Track 3 rather than a round number.