A buy limit order is placed:

Below current price. Buy limit orders are placed below current price to buy at a discount.

A stop-loss order is used to:

Limit potential losses. A stop-loss automatically exits your position at a predetermined price to limit losses.

Order Types

Market, limit, and stop orders explained

Understanding order types is essential for executing your trading plan:

Market Order: Executes immediately at the current best price. Use when you need to enter/exit right now.

Limit Order: Executes at a specific price or better. - Buy Limit: Placed below current price (buy at a discount) - Sell Limit: Placed above current price (sell at a premium)

Stop Order: Becomes a market order when the trigger price is hit. - Buy Stop: Placed above current price (buy on breakout) - Sell Stop: Placed below current price (sell on breakdown)

Stop-Loss Order: Closes your position at a predetermined loss level.

Take-Profit Order: Closes your position at a predetermined profit level.

Trailing Stop: A stop-loss that follows price, locking in profits as price moves in your favor.

Pro tip: Use limit orders for better entries — you get a better price and it forces you to plan ahead.

Pro tip: Trailing stops are excellent for riding trends without leaving money on the table.

Common mistake: Using only market orders for every trade. Better: Use limit orders to get better entries at key levels you've identified in advance.

Key takeaways

Market orders execute instantly at current price
Limit orders wait for better prices
Stop orders trigger breakout entries
Always pair entries with stop-loss and take-profit

Quiz

A buy limit order is placed: Answer: Below current price. Buy limit orders are placed below current price to buy at a discount.
A stop-loss order is used to: Answer: Limit potential losses. A stop-loss automatically exits your position at a predetermined price to limit losses.

Educational content, not financial advice.