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Whats the difference between stop and limit orders


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When trading Forex with a spread betting company you will come across Stop and Limit orders.

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Whats the difference between stop and limit orders

  1. 1. Whats the difference between stop and limitorders?Another question I get asked a lot, is if there is a difference between a stop and alimit order.Well. I can tell you they are both types of order to openSo first, I will explain what an order to open is What we are talking about is setting up an agreement with the spread bettingcompany, so when an order hits a specific price they will open a trade foryou.When the market price reaches your specified price the trade order is filledBut if the market doesnt actually reach the market level you specified, then itdoesnt become a live trade. So lets look at what an open to order ticket actually looks like 
  2. 2.  Now if you take a look at the fifth box down, where it says type there is two types oforder you can selectStop and Limit So whats the difference? Limit order
  3. 3.  The best way to look at Limit orders is that you are wanting to get a better pricethen is currently on offer, so, if your buying but you think the market may dropa little before it moves up, you would place a limit order lower then where themarket currently is.This way, the order will trigger at that lower level and you get a betterprice.Also if you are looking to sell and think the market may move up a little beforemoving down, you would place a limit order slightly higher then where the pricecurrently is. So if your hoping the market will move in one direction in the long term but think itmy move a little in the opposite direction in the short term, you would open a limitorder Stop order A stop order is very similar in theory, but there is one slight difference.The best way to think of a stop other is that you are looking for confirmation. so,say if you want to open a buy order, you would place the order slightly higherthen the current price.You would do this when you are not 100% sure the market will move up, so you arelooking for confirmation and want to see the market to start going up first beforeopening your order.Once the market starts moving up, this would trigger your stop order.So if your buying you would place a stop order higher then the current priceand if your selling, you would place a stop order lower then the current price. Thats it.... Thats how limit and stop orders work, easy to understand, but a little tricky toexplain
  4. 4. Hopefully I have explain this clearly for you. Any questions, please leave a comment below and I will promise to respond asap.ThanksChris(admin)