Difference between buy limit and buy stop order

When you are entering a trade there are 2 methods to do it

• By entering at market price:  You will be buying or selling at the current market price.
• Using pending orders: If you want to buy/sell at a particular price (which you analyse as important) and that price has not yet reached, you can use pending orders.

When to use pending orders?

If you are buying:

Pending orders for a buy can be put as buy limit or buy order.

• Buy limit: If you want to buy at price below the current price use this tool.

E.g.: If you are trading a breakout strategy and waiting for retracement confirmation, you can put a buy limit near the support or resistance zone where retracement is likely to happen. So when the price which is currently higher due to breakout comes down for retracement, your buy order will get executed.

• Buy stop: When you need to buy at a price above the current price, put a buy stop order.

If you are selling:

• Sell limit: This can be used if you need to sell the currency pair when price is above current price level.
• Sell stop: if you want to short at a price below the current price use sell stop.

E.g.: if you find a major resistance level above the current price and wish to short if price reaches that level, then this tool can be used.

Benefits of pending order:

• Choose the price: Pending orders help you to choose the price at which you want to trade
• Trade without your presence: Pending orders are greatly helpful for those who cannot spend their time in front of computer to execute trade.
•  You can set your stop loss and take profit levels in the pending order itself.
• You can set the expiry time for order. So if the price did not reach the price level you mentioned within that time the pending order get automatically deleted.
• Reduces impulsive trading to an extend: In my opinion pending orders help to reduce impulsive trading.

How to put a pending order in mt4:

See the picture above. That is the screen for pending order in mt4. Same way as other order, select new order you will be able to see a drop down at tab pages: MARKET EXECUTION. Click on that you will see option for pending order.

The first box shows the drop down where you have to select, buy limit, buy stop, sell limit etc.

Second box shows the warning that the current price and pending price should differ by at least this many pips. This value is different for different currency pair.