#OrderTypes101

There are two main types of pending orders: stop orders and limit orders, which are further divided depending on the type of transaction (buy or sell). As a result, we have 4 orders with different execution mechanics.

Buy Limit — used when you need to buy an asset at a price lower than the current price.

Often useful within a 'retracement' strategy when a trader lowers the price to a certain level with a subsequent recovery;

Sell Limit — applied to sell above the market price. Useful when the goal is to lock in profits if the asset rises to a certain level;

Buy Stop — this is a buy order above the current price, which is activated when the specified level is reached. Used when expecting an impulse rise — for example, if the price breaks through a resistance level;

Sell Stop — a sell order below the current price. Used to limit losses or during trading on a breakout of a support level.

To visually understand the difference between a limit order and a stop order, let’s consider the same transaction using different instruments.