Stop order
a.k.a. Buy stop, Sell stop, Entry stop
An order to buy above the current price or sell below it, triggered once the market moves through your chosen level.
A stop order waits for price to break a level. A buy stop sits above the current price; a sell stop sits below. Once price touches it, it becomes a market order.
Traders use buy stops to catch breakouts above resistance and sell stops to catch breakdowns below support. A stop-loss is the same mechanism pointed at the exit.
Catching a breakout
- EUR/USD at 1.0850 has bounced off 1.0875 three times.
- You set a buy stop at 1.0880, just above that ceiling.
- If price smashes through, you are in at about 1.0880.
Bottom line: The order only fires if the market proves it has the strength to break out.
Placing a breakout stop right on an obvious level, then getting filled on a fake-out that instantly reverses.
Keep this word for good
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