Understand Buy Stop and Types of Forex Orders for Profitable Trading

Success in Forex not only depends on luck but also relies on solid knowledge of order types. Each type of order has its own role, and understanding how to use them correctly will help traders optimize entry points and manage risks effectively. This article will help you grasp the entire Forex order system from basic to advanced levels.

What Is an Order and Why Is It Important?

In Forex trading, an order is a directive that a trader gives to buy or sell a currency pair. Choosing the right type of order that aligns with your strategy will determine your ability to profit. A professional trader not only needs to understand how each order works but also when to apply them.

Two Main Types of Orders: Market Orders and Pending Orders

Market Order - Immediate Execution

A market order is executed instantly at the current price on the screen. When a trader sees a good opportunity and decides to enter, the trade will match at the Ask price (if buying) or the Bid price (if selling).

Example: The EUR/USD pair is trading at Bid 1.32211 and Ask 1.32366. If you place a buy order immediately, you will receive the Ask price 1.32366. Conversely, a sell order will match at the Bid price 1.32211.

This type of order is very suitable for scalpers or day traders because it guarantees instant execution.

Pending Order - Trading According to Plan

Pending orders allow traders to set an order at a predetermined price without continuously monitoring the chart. This is a planned trading method, rather than just reacting to market prices.

Limit Orders - Buy Low, Sell High

Sell Limit - This order is used when you want to sell at a higher price than the current market. It will be automatically triggered when the market reaches your specified price.

Buy Limit - This order is used when you want to buy at a lower price than the current market, waiting for the market to drop to your desired level before entering.

Real example: EUR/USD is currently trading at 1.2432. You predict the price will rise to 1.25 and then fall again. You place a Sell limit at 1.25. When the price hits this level, the order will automatically be triggered. Or, if you think the price will drop to 1.23 before rising again, you place a Buy limit at 1.23 to enter at a lower price.

Buy Stop - Buy Stop Order

Buy Stop is a stop-buy order executed when the price reaches or surpasses your specified level. Unlike Buy limit, Buy Stop is a buy order at a higher price than the current market.

How Buy Stop works:

• You specify a price above the current market price
• When the market price rises and hits this level, the order is automatically triggered
• You enter a buy at the predetermined level

When to use Buy Stop: This order is often used when you want to enter after confirming an upward trend. Instead of waiting and watching every second, you simply set a Buy Stop at your desired entry point, allowing you to do other tasks, and the order will activate automatically when conditions are met.

Example of Buy Stop: USD/JPY is currently at 88.60 and you see an upward trend. You anticipate that when the price reaches 88.80, there will be a buy signal. Instead of manually placing an order then, you set a Buy Stop at 88.80. If the price rises to this level, the order will automatically trigger, and you will enter at the desired price.

Sell Stop - Sell Stop Order

Sell Stop is an order executed when you want to sell at a price lower than the current market. It will be triggered when the price drops to your specified level.

Example: You entered a buy order at 1.2345 but want to protect your profit. You set a Sell Stop at 1.23 as a safety stop point.

Additional Orders - Risk Management

Take Profit Order

This order is triggered when the price reaches your desired profit level. If you are in a BUY position, the take profit order is a Sell limit at a higher price than entry.

Example: You buy EUR/USD at 1.2345 and set a Take Profit at 1.24. When the price rises to 1.24, the order automatically sells, securing a profit of 55 pips.

Stop Loss Order

Conversely, the Stop Loss order exits the trade when the market moves against your prediction. It is an essential tool to preserve capital.

If you buy at 1.2345 and set a Stop Loss at 1.23, if the price drops to this level, the order will automatically sell to cut losses at 45 pips. Professional traders always use Stop Loss on every trade to limit risks.

Trailing Stop - Flexible Profit Protection

This order allows the stop-loss to move with the price within a specified distance you set. When the market moves favorably, the trailing stop automatically shifts upward, helping to protect accumulated profits.

Example: You sell USD/JPY at 88.80 with a Trailing Stop of 20 pips. If initially the Stop Loss is at 89.00 but the price drops to 88.60, the Trailing Stop automatically moves down to 88.80. If it continues to fall to 88.40, it moves again to 88.60.

Note: Trailing Stop is suitable for professional traders. It requires trading software to be always active; if the application is closed, the order will be canceled.

How to Place Forex Orders on MT4/MT5

Step 1: Open a New Order

Click “New Order” to start. The trading window will appear. Enter the trade volume — with a $1000 account, it’s safe to set 0.01 lots.

Step 2: Choose Order Type

Select between two options:

• “Market Order” - immediate market execution
• “Pending Order” - order that activates when conditions are met

Step 3: Set Risk Management

Add Take Profit and Stop Loss to control your profit and risk.

Step 4: Close the Order

When you want to close the trade, right-click on the open position and select “Close”.

Conclusion

Understanding the various types of orders in Forex, especially Buy Stop and other risk management orders, is fundamental for effective trading. Each order type plays a unique role in your trading strategy. Applying this knowledge correctly will help you achieve consistent profits in this dynamic Forex market.