Order types: market, limit, stop
How the word 'order' is read on the ticket
An order is an instruction to a broker. The ticket on the platform asks for five things: the instrument, the direction, the size, the order type, and the price or trigger. The order type is the only field that changes how the price is chosen. AUD/USD at 0.6640 is the reference price for every example here.
A market order carries no price field. The platform shows the current bid and ask, and the fill happens at whichever side applies to your direction. If you buy, you pay the ask. If you sell, you receive the bid. The difference between the two is the spread, and it is already a cost before the market moves at all.
A limit order carries a price field. You set a price better than the current market. A buy limit sits below 0.6640. A sell limit sits above it. The order waits until the market reaches that price, and it may never reach it. A stop order also carries a price field, but that price is worse than the current market. A buy stop sits above 0.6640. A sell stop sits below it. Once the market touches the trigger, the order becomes a market order.
Where the fill price comes from
The trigger price and the fill price are separate numbers. A stop buy at 0.6660 triggers when the ask reaches 0.6660. The fill is the next available ask, which can be higher. On one standard lot, one pip is 10 units of the quote currency. At 0.6640, that converts to about A$15. A five pip slip is about A$75. A limit buy at 0.6625 fills at 0.6625 or better, because the market must come to your price. A market order fills at the current ask or bid, whatever it is at that moment.
Slippage is the gap between the price you expected and the price you got. It is most common around news releases, at the daily open, and when the market gaps over a weekend. Brokers vary in how they handle these moments. Some fill at the first available price. Some reject the order. Some apply a maximum deviation setting on the ticket. The final figure on your statement is the one that counts.
The order ticket also shows the size in lots. One standard lot on AUD/USD is 100,000 units of the base currency. A mini lot is 10,000 units, and a micro lot is 1,000 units. Pip value scales with size. At 0.6640, one pip on a mini lot is about A$1.50, and on a micro lot about A$0.15. Check the pip value field on the ticket before sending, because it changes with the instrument and the size.
What the platform records after the trade
The statement lists the order type, the requested price, the trigger price if any, and the fill price. It also lists commission and swap if the broker charges them. Commission varies between brokers. Some charge a fixed amount per lot. Some build the cost into a wider spread. Swap is a daily charge or credit for holding a position overnight, and it depends on the instrument and the direction. None of these figures are fixed across brokers.
A limit order that never fills leaves no trade on the statement. It appears only in the order history as cancelled or expired. A stop order that triggers appears as a market fill at the price the broker gave. If the market gaps past your trigger, the fill can be several pips away, and the statement will show that gap. This is why the trigger price is not a promise of the fill price.
Platforms also offer stop loss and take profit orders. These are attached to an open position. A stop loss is a stop order that closes the position at a worse price. A take profit is a limit order that closes it at a better price. They use the same mechanics as the three order types above, so the same rules about triggers and fills apply. Check the order ticket before sending it, and check the statement after.
One idea, three orders, three prices
| Step | Amount | Note |
|---|---|---|
| Idea | Buy AUD/USD | the same decision in all three cases |
| Market order price | 0.6640 | the price showing when the order is sent |
| Limit order price | 0.6620 | 20 pips below the market, waiting for a better buy price |
| Stop order trigger | 0.6660 | 20 pips above the market, triggered once price reaches it |
| Pip value, one standard lot | A$15 | 10 quote units per pip, converted at about 0.6640 |
| Gap between market and limit | 20 pips = A$300 | 20 x A$15 on one standard lot |
| Gap between market and stop trigger | 20 pips = A$300 | 20 x A$15 on one standard lot |
The fill price may differ from the trigger or requested price. Brokers vary in how they round prices, whether they add commission or spread on top, and how they handle gaps, so the final figure on a statement can differ from the figures above.
Doing it once, step by step
The reader will place each of the three order types on a demo platform, using AUD/USD at 0.6640, and then read the order history to see what each one did.
- 01
Open a demo account
Choose a broker that offers a demo account and check that ASIC regulates it. Fund the demo with virtual money only. Confirm that the platform shows AUD/USD and that the order ticket has fields for type, size, and price. Do not use a live account for this exercise.
- 02
Place a market order
Buy one micro lot of AUD/USD at the current price. Note the ask on the ticket before you send it. After the fill, compare the fill price with the ask you saw. The difference is the spread and any slippage. Close the position and record both numbers.
- 03
Place a limit order
Place a buy limit 15 pips below 0.6640, which is 0.6625. Leave it open and watch the market. If the price does not reach 0.6625, cancel the order and note that it never filled. If it fills, record the fill price and compare it with 0.6625.
- 04
Place a stop order
Place a buy stop 20 pips above 0.6640, which is 0.6660. Wait for the market to reach it, or cancel if it does not. If it triggers, record the trigger price and the fill price separately. Work out the difference in pips and in A$ on one micro lot.
- 05
Read the order history
Open the order history and find each of the three orders. Check the type, the requested price, the trigger price, and the fill price. Note any commission or swap shown. Compare the figures with the ones you wrote down. This is the record that matters, not the ticket.
- 06
Repeat with a different size
Place the same three order types using one mini lot instead of one micro lot. Record the pip value shown on the ticket for each. Compare the A$ result with the micro lot result. This shows how size changes the money at risk without changing the order type.
The mistake most people make here
The common mistake is to treat a stop order as a limit order. A limit waits for a better price and may never fill. A stop waits for a worse price and is designed to trigger once the market reaches it, which is why it is used to exit or to enter on a break. People also assume the trigger price is the fill price. In fast markets the fill can be several pips away, and on one standard lot each pip is about A$15, so a five pip slip is roughly A$75. Check the order ticket before sending it, and check the statement after.Check yourself
AUD/USD is at 0.6640. A limit buy is placed 15 pips below. What is the limit price, and what is 15 pips worth on one standard lot in A$?
0.6640 minus 0.0015 = 0.6625. 15 pips x A$15 = A$225.
A stop buy triggers at 0.6660 and fills at 0.6665. How many pips away from the trigger is the fill, and what is that in A$ on one standard lot?
0.6665 minus 0.6660 = 0.0005, which is 5 pips. 5 x A$15 = A$75.
Why can a limit order stay unfilled while a stop order almost always triggers once its level is reached?
A limit sits at a better price and only fills if the market comes to it. A stop sits at a worse price and triggers when the market reaches it, so it becomes a market order at that point.
Questions that come up next
Can a stop order turn into a limit order if the price moves back?
No. Once a stop triggers, it becomes a market order. That means it fills at the next available price, which may be worse than the trigger. It does not wait for a better price, and it does not become a limit. If you want a better price after the trigger, you would need to place a separate limit order. The platform will not do that for you.
What happens to a limit order if the market gaps past my price?
A limit order fills at your price or better, but a gap can skip your price entirely. If the market jumps from 0.6640 to 0.6620 without trading at 0.6625, your buy limit at 0.6625 may not fill. Some brokers fill at the first available price after the gap, which could be better than your limit. Others leave the order unfilled. Brokers vary in how they handle gaps, so check the terms.
How do I know which order type to use for a trade?
The choice depends on what you want the price to do. A market order is for entering or exiting now, at whatever price is available. A limit order is for waiting for a better price, but it may never fill. A stop order is for triggering once the market reaches a worse price, often to exit a loss or to enter on a break. The order type sets the condition, and the condition sets the price you get.
Does the spread affect a limit order the same way as a market order?
A market order crosses the spread immediately. If you buy, you pay the ask, which is higher than the bid. A limit order does not cross the spread when it is placed. It waits at your price. When the market reaches it, the fill may still include the spread depending on the broker. Brokers vary in whether they add commission or widen the spread on limit fills. The final cost is on your statement.
What is the difference between a stop order and a stop-limit order?
A stop order triggers a market order once the trigger price is reached. A stop-limit order triggers a limit order at a specified price. The stop-limit gives you control over the worst price you will accept, but it may not fill if the market moves too fast. A stop order is more likely to fill, but the fill price can slip. Both are used to manage risk, but they behave differently in fast markets.
Can I change or cancel an order after placing it?
Yes, if the order has not filled yet. On most platforms you can modify the price, the size, or cancel it entirely. A market order fills immediately, so there is no chance to change it. A limit or stop order sits on the book until triggered, so you can adjust it. Once a stop triggers and becomes a market order, it is too late to cancel.
The words used on this page
- order
- An instruction to a broker to buy or sell an instrument. It includes the instrument, direction, size, order type, and price or trigger. The order type decides how the price is chosen.
- market order
- An order to buy or sell at the current market price. It has no price field. The fill happens at the ask if you buy, or the bid if you sell. The spread is paid immediately.
- limit order
- An order to buy or sell at a specified price or better. A buy limit sits below the current market. A sell limit sits above it. It may never fill if the market does not reach that price.
- stop order
- An order that triggers a market order once the market reaches a specified price. A buy stop sits above the current market. A sell stop sits below it. The fill price can differ from the trigger.
- slippage
- The difference between the price you expected and the price you actually got. It is common around news releases and at market opens. On one standard lot of AUD/USD, each pip is about A$15.
- pip
- The smallest standard price move in a currency pair. For AUD/USD, one pip is 0.0001. On one standard lot, one pip is 10 units of the quote currency, which is about A$15 at 0.6640.
What to take away
- A market order takes the current price, a limit order waits for a better one, and a stop order triggers at a worse one.
- The trigger price is not always the fill price; slippage can move it by several pips, which is real money.
- Check the order ticket before sending, and check the statement after, because brokers vary in rounding, commission, and gap handling.
- The order type is the only field that decides how the price is chosen, so match it to what you want the market to do.