Order types and how to use them safely

An order tells your broker how and when to open or close a trade. Choosing the wrong type is a common and avoidable source of losses.

Order	What it does	Risk to know
Market	Opens or closes immediately at the best available price	The fill can differ from the price you saw (slippage), especially in fast markets
Limit	Buys below or sells above the current price, at your price or better	May never fill if price does not reach it
Stop (entry)	Buys above or sells below the current price once it is reached, often used for breakouts	Fills at the next available price once triggered, so slippage is possible
Stop-loss	Closes a trade at a set price to cap the loss	In a fast move or over a gap, a standard stop can fill worse than your level
Take-profit	Closes a trade at a set profit target	Price can reach your target’s neighbourhood and reverse without filling it
Trailing stop	A stop that follows price by a set distance as the trade moves in your favour	A tight trail can stop you out of normal noise
OCO (one cancels other)	Two linked orders: when one fills, the other is cancelled	Not available on every platform

Slippage and gaps

Slippage is the difference between the price you expected and the price you got. It is most common around news releases and when liquidity is thin. Gaps happen when price jumps between two levels with no trading in between, most often over the weekend. Some brokers offer guaranteed stops in some regions, usually at an additional cost or a wider spread.

A worked example

You buy EUR/USD at 1.1000. You place a stop-loss at 1.0975 (25 pips below) and a take-profit at 1.1050 (50 pips above). The risk is 25 pips and the reward is 50 pips, a risk-to-reward ratio of 1:2. Whatever position size you choose should make the 25-pip loss an amount you have decided in advance you can accept.

General information for education only, not financial advice. Trading forex and CFDs carries a high risk of loss. Read the disclaimer.