01The four building blocks
| Order | Guarantees | Risk | Typical use |
|---|---|---|---|
| Market | Execution | Price — you take whatever is available | Urgent entries and exits |
| Limit | Price (or better) | No fill if price never reaches you | Buying pullbacks, taking profit |
| Stop (stop-market) | Triggers when price is touched | Fills at market after trigger — can slip | Stop-losses, breakout entries |
| Stop-limit | Price limit after trigger | May not fill at all in a fast move | Breakouts where you refuse to chase |
The rule of thumb: limit orders wait for price to come to you; stop orders follow price once it moves. A buy limit sits below the market, a buy stop sits above it. A sell limit sits above, a sell stop below.
02Brackets, OCO and time in force
A bracket order sends an entry together with a stop-loss and a take-profit. The two exits are OCO — one cancels the other — so when the target fills, the stop is removed automatically. This is how professionals ensure every position is protected the instant it opens.
- DAY — expires at the end of the session
- GTC — good till cancelled
- IOC — fill what you can immediately, cancel the rest
- FOK — fill the entire size immediately or cancel
03When stops do not save you
A stop order becomes a market order when triggered. If price gaps through your stop — overnight, on a weekend, or on a news spike — you are filled at the next available price, which can be far worse than your stop.
A stop-limit only fills inside its limit. In a fast crash price can trade straight through the limit and never return, leaving you holding the full loss. Use stop-market orders for protective stops.
Moving a stop to avoid being stopped out converts a planned 1R loss into an unplanned 3R loss. Stops move in one direction only: toward profit.
- Market = certain fill, uncertain price. Limit = certain price, uncertain fill.
- Buy limits sit below price; buy stops sit above price.
- Bracket every trade so the stop exists from the first tick.
- Protective stops can slip in gaps; stop-limits can fail to fill.
- Using a buy stop when you meant a buy limit (or vice versa)
- Placing protective stops as stop-limits
- Widening a stop to avoid taking a loss
Complete “Bid / Ask & Spreads” to unlock this challenge.