Limit & Stop Orders

Why Limit & Stop Orders Matter?

Effective order management lies at the heart of any successful trading strategy. Whether you’re a novice seeking to enter the market with precision or an experienced trader aiming to protect profits, understanding limit and stop orders is essential.

• Control over Execution Price
  Limit orders empower you to specify the maximum price you’re willing to pay (or the minimum you’ll accept), helping you avoid unfavourable fills in fast-moving markets.
• Built-in Risk Management
  Stop orders act as a safety net, automatically closing out positions when price moves against you crucial for protecting capital and maintaining emotional discipline during volatile sessions.
• Enhanced Trading Efficiency
  Using these order types in tandem lets you plan entries and exits in advance, freeing you from constant screen monitoring and allowing you to focus on broader market analysis.

By mastering limit and stop orders, you’ll not only minimise slippage and volatility risk but also gain the confidence to trade systematically, in line with your broader risk-management plan.

This customer-centric approach ensures you’re always in control, reflecting our passion for innovation and excellence in providing you with the tools to thrive.

Ready to take control of your trades?
Practice placing limit and stop orders in your AvaTrade demo account.

What Is a Limit Order?

A limit order is an instruction to buy or sell an asset at a specified price or better. It gives you full control over the execution price and helps you enter or exit positions with precision.

How It Works

• Buy Limit: Placed below the current market price. The order executes only if the market price falls to your limit price or lower.
• Sell Limit: Placed above the current market price. The order executes only if the market price rises to your limit price or higher.
• Order Book Interaction: Your order is queued in the order book at your chosen price level, waiting for a matching counter-party.

Limit Order Execution Process

1. You submit a buy/sell limit order at your chosen price.
2. The order rests in the order book, visible alongside other limit orders.
3. When the market price reaches your limit price, the order is matched and filled either fully or partially.

Ideal Use Cases

• Precision Entry: Enter the market at attractive valuation levels without chasing price.
• Profit-Taking: Lock in gains by setting sell limits at target levels.
• Volatile Markets: Avoid adverse fills during sharp price swings by specifying exactly where you trade.

What Is a Stop Order?

A stop order (or stop-loss order) is an instruction to buy or sell an asset once its price reaches a predefined “stop” level.

Unlike limit orders, stop orders prioritise triggering over price certainty they convert into market orders when activated.

How It Works

• Sell Stop: Placed below the current market price. When the asset trades at or below your stop price, the order becomes a market sell order.
• Buy Stop: Placed above the current market price. When the asset trades at or above your stop price, the order becomes a market buy order.
• Activation vs Execution: The stop price activates the order; actual fill price depends on market liquidity and volatility.

Stop Order Execution Process

1. You submit a stop order with your chosen trigger price.
2. The order stays dormant until the market hits that stop level.
3. Upon activation, it becomes a market order and fills at the best available price.

Ideal Use Cases

• Limiting Losses: Automatically exit losing positions before they deepen.
• Protecting Profits: Move a trailing stop to lock in gains as price moves favourably.
• Trend Confirmation: Enter breakout trades only once momentum builds above (or below) key levels.

Setting stop orders in advance can help you stick to your strategy even when markets get hectic so you stay on track without watching every tick.

Comparing Order Types

Choosing the right order type is all about matching your goals with market conditions and risk tolerance. The table below highlights the key differences so you can select the tool best suited to each scenario:

Recognising these trade-offs lets you craft orders that align with both your strategy and the prevailing market environment so you’re prepared for slippage without sacrificing the precision you need.

Placing Orders on the AvaTrade Platform

This section walks you through placing limit and stop orders on both our web and mobile platforms. Annotated screenshots will help you navigate each step with ease.

WebTrader Walk-through

1. Log In & Navigate to Trading Screen
   • Sign in to your AvaTrade account and select “WebTrader” from the top menu.
   • Choose your desired market (e.g. Forex, Indices, Commodities).
2. Select Instrument & Open Order Ticket
   • Click on the asset you wish to trade.
3. In the order ticket that appears, select “Limit” or “Stop” from the “Order Type” dropdown.
   Configure Order Details
   • Limit Order: Enter your limit price and volume.
   • Stop Order: Enter your stop (trigger) price and volume.
   • Optionally set a “Time in Force” (e.g. GTC, Day).
4. Review & Submit
   • Check the “Estimated Cost” and “Margin Required” figures.
   • Click “Place Order”.
   • A confirmation pop-up will show your order details and status.

By reviewing margin requirements before placing an order, you can avoid unexpected margin calls so you can trade with confidence, even when the markets move quickly.

AvaTrade App Walk-through

1. Open AvaTrade Mobile App
   • Tap the app icon and log in using your credentials.
   • From the home screen, tap the market category icon (e.g. “Forex”).
2. Choose Your Asset & Access Order Form
   • Scroll or search to find your asset, then tap to open its detail page.
   • Tap the “Trade” button at the bottom.
3. Select Order Type & Enter Parameters
   • Tap the “Market” label to reveal other order types, then select “Limit” or “Stop”.
   • Input your desired price and lot size. Optionally toggle “GTC” or set an expiration date.
4. Confirm & Monitor
   • Review the “Required Margin” and “Potential P/L” preview.
   • Swipe or tap “Swipe to Confirm” (iOS) / “Place Order” (Android).
   • View your order in the “Open Positions” tab.

Having your active orders visible in one tab means you can adjust or cancel them on the go so you’re always in control, even away from your desk.

Real-World Case Studies & Trader Insights

Below are three hypothetical but market-grounded examples showing how different order types can be used to navigate actual price moves over the past year.

Range-Bound EUR/USD Entry with a Limit Order

Context: On 11 April 2024, after the ECB held rates unchanged, the euro hit a two-month low of $1.0717 its weakest level since February 2024.

Order Setup: A buy limit at $1.0720 was placed just above the dip, targeting a rebound.

Outcome: The order filled at $1.0717, and over the next eight weeks, EUR/USD rallied to $1.0887 by 6 June 2024  a 164-pip gain.

Rationale:

• Precision Entry: Captures a low-volatility bounce without chasing price.
• Defined Risk: If the dip had gone deeper, the trader’s worst-case fill was known in advance.

 Locking Profits on a Volatile Gold Rally with a Stop-Limit

Context: Spot gold surged to an all-time high of $2,483.60 on 17 July 2024, up 20% year-to-date.
Order Setup: To protect gains while avoiding a fire-sale fill, a stop-limit was placed with:

• Stop (trigger): $2,480
• Limit (minimum fill): $2,475
  Outcome: When gold retraced to $2,467.80 on 13 August, the stop triggered and the limit order filled at $2,475  locking in most of the upside.

Rationale:

• Guaranteed Price Floor: Ensures exits above a predefined level.
• Slippage Control: Limits execution risk in a fast-moving precious-metals market.

Letting Profits Run and Then Locking Them In with a Trailing Stop on Apple

Context: On 11 June 2024, Apple’s share price closed at a record $207.15 after unveiling new AI features.

Order Setup: A 5% trailing stop was attached to an existing long position (initial entry at lower levels).

Outcome: News that Berkshire Hathaway halved its stake on 5 August caused Apple shares to drop 4.8% in one session. The trailing stop automatically executed near $197.17, preserving the bulk of gains.

Rationale:

• Dynamic Risk Management: The stop walks up with the price, locking in profits as the trend unfolds.
• Emotion-Free Exit: Removes the need to decide when to sell during sharp reversals.

Try replicating these setups in your AvaTrade demo account experiment with different price levels and trailing distances to find what works best for your strategy.

Risk-Management Strategies with Orders

Effective use of limit, stop, and trailing orders hinges on integrating them into a robust risk-management framework. Below are key practices to help safeguard your capital and maintain a disciplined approach:

1. Position Sizing Aligned with Risk Tolerance
   • Determine the maximum percentage of your account you’re willing to risk on any single trade (commonly 1–2%).
   • Calculate lot size based on the distance between your entry price and stop level, ensuring a loss never exceeds your predefined risk.
2. Setting Appropriate Order Distances
   • Stops: Place stops beyond key technical levels (e.g. support/resistance, recent swing high/low) to avoid being stopped out by normal market noise.
   • Limits: Position profit-taking limits at realistic targets consider measured moves or Fibonacci levels so you lock in gains without becoming overly ambitious.
3. Combining Orders for Complete Coverage
   • Use a limit order to enter and a stop order to protect that position in one workflow many platforms allow you to bracket trades automatically.
   • Consider a stop-limit order when you need both a trigger and a minimum fill price, trading off execution risk for price control.
4. Adapting to Volatility
   • Calculate average true range (ATR) to gauge current volatility and set order distances at a multiple of ATR (e.g. 1.5× ATR) to give your trade breathing room.
   • In low-liquidity sessions (overnight or holidays), widen stops and limits or reduce position size to account for wider spreads.
5. Reviewing Market Catalysts Before Placing Orders
   • Check economic calendars and corporate news for scheduled events (e.g. central-bank announcements, earnings releases) that can trigger sharp moves.
   • If you prefer to avoid event risk, use deliberately wider stops or refrain from new orders shortly before high-impact announcements.

Planning your order distances and position size in advance helps you adhere to your strategy even when markets become erratic so you can focus on opportunities rather than firefighting losses.

Troubleshooting Common Pitfalls

Even with well-planned orders, things can go awry.

Below are common challenges and quick fixes to keep your trades on track:

1. Trigger Price Misplacement
   • What Happens: You set a stop just inside a technical level (e.g. 5 pips below support), only to get stopped out on a brief spike.
   • Quick Fix: Place stops slightly beyond key levels (e.g. 1.5× ATR beyond support/resistance) to avoid noise-triggered exits.
2. Limit Order Skipping (No Fill)
   • What Happens: The market gaps past your limit price (e.g., during news), so your buy/sell limit never executes.
   • Quick Fix: Use a stop-limit order if you want both trigger and price control, or set a contingent market order as a fallback in volatile sessions.
3. Unexpected Slippage on Stop Orders
   • What Happens: Your sell stop executes at a worse price than the trigger during low liquidity or fast moves.
   • Quick Fix: Consider a stop-limit with a small buffer between stop and limit, or widen stops slightly in thin markets to reduce slippage risk.
4. Order Expiry Confusion
   • What Happens: You forget that a “Day” order expired overnight, leaving you unprotected.
   • Quick Fix: Choose “Good ’Til Cancelled” (GTC) when you want orders to persist, or set explicit expiry dates for specific timeframes.
5. Neglecting Margin & Free Margin
   • What Happens: Placing multiple orders without checking available margin leads to rejections or unexpected liquidations.
   • Quick Fix: Always review the “Required Margin” before submitting, and leave a buffer (e.g. 20%) of free margin to accommodate market swings.

Regularly reviewing your open orders and their parameters helps you catch issues early so you can adjust trigger levels or expiry settings before market moves catch you off-guard.

Limit & Stop Orders FAQ

• Can I modify or cancel my orders?

  On web or mobile, open the Open Orders list, select your order, and choose Edit or Cancel.

   
What happens if the market gaps past my price?
If a gap skips your limit price, the order stays open until the price returns or expires. A stop order becomes a market order and fills at the next available price, which may differ from your stop.
 
• Will stop orders always protect me?

  Stop orders help limit losses, but they can still slip in fast or illiquid markets. For tighter control, use a stop-limit order with a minimum fill price.

   
• When should I use a stop-limit versus a trailing stop?

  Use a stop-limit to guarantee a minimum exit price in volatile conditions. Use a trailing stop to lock in profits as the trend moves in your favour.

   

Disclaimer:
AVA guarantees all Limit orders will be executed at the specified rate, not a better rate. AVA does not guarantee it Stop Losses and Trailing Stop. If there is a sharp market move, and the current price of an instrument breaks through the client’s Stop Loss or Trailing Stop rate, the order will be executed at the next available price.