What is a Buy Stop Order?
Buy Stop is a type of pending order that represents a long position opened by the forex broker when the price reaches a level specified by the trader.
How Does a Buy Stop Order Work?
A Buy Stop order is placed if the trader believes the price will rise to a certain level, typically a resistance level, and then continue to increase. The purchase will always be made at a price HIGHER than the current market price.
For example, on the daily chart of the AUD/USD currency pair, we observe a Double Bottom trend reversal pattern. We assume that the price will soon reach the resistance level at 0.7270, break through it, and the pair will begin forming an uptrend.
The current price in the AUD/USD pair is 0.71966. The trader wants to make a purchase at a price higher than the current one. The Buy Stop pending order is set at the assumed breakout level of the resistance price.
When the price reaches the level specified by the trader, the long position will be automatically opened by the forex broker, even if the trading terminal is closed. All pending orders placed by the trader are stored on the broker’s servers and will execute the Buy Stop order at the specified price.
How to Set a Buy Stop Pending Order?
In the MetaTrader 4 trading terminal, the Buy Stop order, like an immediate execution order, is set through the order panel. To place a Buy Stop order, select “Pending Order” in the “Type” tab, and then choose the type of pending order – Buy Stop.
After choosing the order opening price, click “Set Order.” A dashed line will appear on the currency pair chart indicating the order opening level, and information about the order will appear in the “Terminal” tab.
As with an immediate execution order, for an already set Buy Stop order, it is necessary to set stop-loss and take-profit orders. To do this, right-click on the set order in the “Trading” tab. In the context menu that appears, select “Modify or Delete Order.”
In the order modification menu, you can change the execution price, the levels of stop-loss and take-profit, as well as set the time and date for automatic removal of an unexecuted order if the price does not reach it.
Example: we set a stop-loss below the previous price low (0.6890), take-profit at the height of the Double Bottom pattern (0.7645), and set the time and date for automatic removal of the order (22:00 09.10.2015) if it is not executed.
Example of setting a
FAQ
What is a Buy Stop Pending Order?
A Buy Stop is a pending order that opens a long position when the price reaches a specified level, typically higher than the current market price.
How does a Buy Stop Order work?
A trader places a Buy Stop order if they expect the price to rise past a resistance level and continue increasing. The order executes automatically once the price reaches the set level.
How do you set a Buy Stop Order?
In trading platforms like MetaTrader 4, select ‘Pending Order’ and choose ‘Buy Stop’. Set the desired price, stop-loss, and take-profit levels, then confirm the order.
