Order types: market, limit and stop
An order tells the trading platform what action you want to take and under which conditions. Following the lesson on leverage and margin, this lesson explains market, limit and stop orders, including how price movements affect execution. Understanding these differences helps you recognise what an order can—and cannot—control.
1. Orders and trading prices
An order is an instruction to buy or sell an instrument. A market order requests execution at the best available price now. A pending order waits until its price condition is met. Limit and stop orders are two common pending order types. Placing a pending entry order does not immediately create an open position, and execution is not guaranteed.
Most forex and CFD instruments show two prices: the bid and the ask. The ask is the price used for buying, while the bid is used for selling. Their difference is the spread. When checking whether an order's price condition has been reached, look at the relevant side of the quote rather than assuming the chart displays both prices.
2. Market orders: execution now
A market order prioritises execution rather than a particular price. When you submit a buy or sell request, the platform seeks to execute it at the best price available. The price displayed when you click is not necessarily the final execution price. Quotes can change while the request is being processed, especially when markets move quickly or available liquidity is limited.
The difference between an expected price and the actual execution price is called slippage. It can be favourable or unfavourable. For example, a hypothetical market buy submitted while the ask is 1.1000 could execute at 1.1002, which is two pips higher. Market orders do not remove execution risk, and submitting a request does not guarantee that it will be accepted or filled.
3. Limit orders: a price boundary
A limit order specifies a price or better. A Buy Limit is normally placed below the current ask, while a Sell Limit is normally placed above the current bid. Here, “better” means a lower price for a purchase or a higher price for a sale. It describes the execution price, not whether the resulting position will become profitable.
A limit order gives price control, but not certainty of execution. The market may never reach the specified level, or there may not be enough available liquidity to fill the order. Seeing the level touched on a chart is not, by itself, proof that your order should have filled: the relevant bid or ask and execution conditions also matter.
4. Stop orders: activation at a level
A pending stop entry order is normally placed beyond the current market price. A Buy Stop sits above the current ask, and a Sell Stop sits below the current bid. Once the relevant price reaches the stop level, the order activates for execution at the available market price. Unlike a limit order, its specified level is a trigger, not a guaranteed execution price.
This distinction matters during fast price changes or gaps, when prices jump between levels without trading at every price in between. A stop order may execute beyond its trigger price. Also, a stop entry order is not the same instruction as a stop loss: the first is used to enter a position, while the second is intended to limit losses on a position.
5. Worked example and MT5 checks
Assume hypothetical EURUSD quotes of 1.1000 bid and 1.1002 ask. A market buy requests execution at the available ask. Alternatively, a Buy Limit at 1.0990 waits for a lower ask, while a Buy Stop at 1.1020 waits for a higher ask. If that stop triggers but fills at 1.1023, slippage is three pips. At one standard lot of 100,000 units, each pip is USD 10, so the fill is USD 30 less favourable than execution at the trigger price. These are separate illustrations, not trade recommendations.
In MT5, check the symbol, volume, order type and any required price before submitting. For pending orders, also review any available expiry setting and confirm the order's status afterwards. Execution remains subject to applicable trading conditions and sufficient margin. CFDs are leveraged and carry a high risk of loss; choosing an order type does not change that. The next lesson explains stop loss and take profit.
- Market orders seek immediate execution, not a guaranteed price.
- Limit orders specify a price or better but may remain unfilled.
- Stop entry orders activate at a level; execution can differ.
- Check bid, ask, volume and order status before assuming execution.