Trading knowledge libraryWhat Is a Stop OrderMarket Basics
Market Basics
What Is a Stop Order
A stop order waits at a price worse than the current one and becomes a market order the moment the price touches it. This paper shows you what it does, the two jobs it is used for, how the wire was touched on one real day and what the trade did afterwards, how to tell a stop from a limit, and how to place one on your platform.
A stop order waits at a price worse than the one on the screen. At the open of 3 September 2026 the euro against the dollar is 1.15872; a buy stop at 1.15902 — a pip is the fourth decimal place, so three pips higher — says: do nothing unless the price rises to here, and then buy. It is a tripwire. Below it, the order is asleep. The moment the price touches it, the order wakes up and turns into a market buy, filled at whatever the price is right then. It does not carry a price of its own after that; the wire only decides when.
Why would anyone want a worse price? Because a stop order is not about the price; it is about the price having moved. Above the market, a buy stop gets you into a rise only once the rise has started. Below your own entry, a sell stop gets you out of a trade once it has gone against you by a set amount. That second use has its own name — the stop loss, which is a stop order that closes a losing trade for you — and its own paper on this shelf. Both are the same tool: a wire, and a market order behind it.
