Limit and Stop Orders

The four pending orders

How they fill

A limit order fills at its price or better and never worse; if the market gaps through it, it fills at the better price. A stop order becomes a market order when its price trades, so it can fill worse than its level in a fast market, and in a gap it fills at the first available price beyond it. That asymmetry is why stop losses can slip and take profits cannot.

Choosing between them

The question is whether you want a better price or a confirmed move. A trader who thinks a level will hold places a limit at it and accepts that the market may never come. A trader who thinks a level will break places a stop beyond it and accepts entering at a worse price than the level. Both are legitimate; mixing them up, which is easy because a buy limit and a buy stop differ only in which side of the price they sit, is one of the classic platform errors.

Expiry

Pending orders carry an expiry: good till cancelled, good till a date, or day only. A limit left open for weeks fills when the plan behind it is forgotten. Set expiries that match the idea, and review open orders every session.

Key takeaways

• Limits wait for a better price; stops wait for a worse one and then act as market orders.
• Limits never fill worse than their price; stops can.
• Buy limit below, sell limit above, buy stop above, sell stop below.
• Set expiries and review pending orders daily.