In forex trading, it is evident that the trader has to move with strategic approaches and various management skills. Hence, there are different trading scenarios, all of which requires different orders for entry and exit in the market. One of such orders is buy stop forex.
Now your query, what is buy stop in forex?
Buy stop in forex market is an order of creating an entry point above existing current price. That’s because the trader expects the present market trends to continue rising higher in the coming days. While the profit target is above your entry level, the stop loss order is below it.
The concept of buy stop in forex is same as in the stock market.
Stop loss and buy stop forex: Almost similar
Buy stop order is used to purchase a security that is entered at an amount above the up-trend market price. As this market value surpasses or touches the buy stop price, profit is triggered.
Now both the orders (stop loss and buy stop) are almost similar. The primary difference is that stop loss is used to exit short position and buy stop is used to enter long position.
Let’s see an instance
Suppose, the current price of currency pair USD/EUR is 1.0495. And you wish to purchase this pair, in case price rises to touch the level of 1.0515 or even higher. Then your buy stop order has to be placed at 1.0515.
Other associated orders you must know
Well, this was a brief about buy stop forex order. Now there are some other orders in forex that are important for every beginner to know.
- Sell Stop – Unlike buy stop order, this one expects the existing down trend to fall further. A trader, in that case, creates his entry point below present market value. Here again, profit target is below this entry level and stop loss is above it.
- Buy Limit – A buy limit order is used when the trader expects a sudden upward turn in the down-flowing market value. In such case, the trader creates an entry point below current market value. This order will be triggered when market value of currency reaches that entry point.
- Sell Limit – Quite as you can guess, this is opposite to buy limit order. This order is placed when a trader speculates the current value to bounce downwards from upward moving value graph. He chooses to create an entry point above existing market value point. Profit target and stop loss remain above and below the entry point respectively. This order goes short when price level is reached.
Difference between buy limit sell stop order
While buy limit is used for entering forex market, sell stop is used for two purposes –for closing a current buy position and for initiating a short position of sell.
As a beginner, it is very essential to understand forex buy limit sell limit buy stop sell stop concepts. Get hold of afx trading book or opt for online course to enhance both knowledge and skills on buy stop forex.