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What is Buy Stop Limit? Trading Basics

Forex Educational Video Series

Author: Andreas Thalassinos (BSc, MSc, MSTA, CFTe, MFTA), Head of Education at FXTM.

What is Buy Stop Limit order in Forex trading?

Now that we know what Buy Stop and Buy Limit orders are, it’s time to find out about the pending order that combines the two. This is called the “Buy Stop Limit” and at the time of making this video, it’s only available on the MetaTrader 5 platform. This pending order allows a trader to specify a price above the Current Price of the instrument they are trading. In this context, that specified price above is simply referred to as Price. If and when that Price is reached, a Buy Limit order is automatically placed at a lower level (because the golden rule of trading is always to buy low). This lower level is called the Stop Limit price.

In this context, the Buy Limit will be placed only if the Ask price reaches the Price. We are referring to it as Ask price, of course, because we are looking to buy. Once the Ask price drops to the Stop Limit Price, the Buy Limit order is triggered and the position is closed. So, for example, if a trader was looking to buy EURUSD and the current price is 1.3050, he may decide to put the Price at 1.3150 because he believes it will reach that point. But, because he believes that it will reverse and start going back down, he places a Buy order with a Stop Limit Price at 1.3100.

Buy Stop Limit is used by traders who anticipate that the price movement of their instrument will experience a temporary downswing before resuming higher. Next up is the natural companion; Sell Stop Limit.  

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

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