Order types explained – market, limit, stop, stop-limit and trailing stops

Knowing exactly what happens when you click is basic risk management. Platforms use slightly different names, but the mechanics are the same.

#Market order

Buy or sell immediately at the best available price. You are certain to be filled but not of the price: in a fast market you may be filled worse than the price on screen – slippage. EU brokers must have an order execution policy and take sufficient steps to get the best possible result for clients (best execution); some also let you set a maximum acceptable deviation.

#Limit order

Buy below or sell above the current price, at your price or better. Use it to enter on a pull-back or take profit at a target. A take-profit order is a limit order attached to a position.

#Stop order

Buy above or sell below the current price once the market reaches your level; it then becomes a market order. A stop-loss is a stop order that closes a losing position. Because it becomes a market order, it can be filled worse than your level when prices gap – over a weekend, after a central-bank surprise, or at the Sunday open.

#Stop-limit order

Becomes a limit order, not a market order, when triggered. You avoid a bad fill but risk not being filled at all, which is dangerous for a stop-loss.

#Trailing stop

A stop-loss that follows the price at a set distance as the trade moves in your favour and stays put when it moves against you. On MetaTrader, trailing stops run in your terminal and stop working if the platform is closed; server-side trailing stops at some brokers do not have that limitation.

#Guaranteed stop-loss

Offered by some CFD brokers for a premium. The broker guarantees your exact stop price even if the market gaps through it. For retail clients in the EU, negative balance protection already stops your account going below zero, but a guaranteed stop controls the size of the loss on an individual trade.

#Order duration

• Good 'til cancelled (GTC) – stays until filled or cancelled.
• Good for day – expires at the end of the trading day.
• Good 'til date – expires at the time you set.

#Practical tips

• Place stops where your trade idea is wrong, then size the position to the stop – see position sizing.
• Avoid placing stops at obvious round numbers where many other stops cluster.
• Know your broker's behaviour on weekend gaps and read its execution policy.