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What’s the difference between buy limit vs buy stop orders? Take a look below to see how these orders help you choose how much you make when CFD trading at CAPEX, the best online broker!
A buy limit order lets you set the maximum price that you’d buy a particular asset for. Once the asset goes below that set price, the trading platform would automatically execute the purchase according to the quantity that you’d set. Conversely, a buy stop order allows you to sell a particular asset once it reaches a certain minimum market price. As soon as the asset reaches this set price, the trading platform would put your asset up for sale. Being able to successfully use buy limit and buy stop orders is an essential part of using an online broker site.
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Buy limit orders and buy stop orders are both pending orders which allow you to set the values of the order and then leave them be. This means that you could set the order to buy or sell a particular asset and let them carry out the task without requiring you to be present. These pending orders offer you a great way to avoid the kind of ‘slippage’ that you get with other kinds of market orders.
Plus, as long as you realise that you might miss some decent value trades, buy limit and buy stop orders are particularly useful when trading CFDs on Forex markets such as those featured here at our CAPEX.com online broker site.
Buy limit and buy stop orders, like the ones you can use at CAPEX for trading, are both pending orders that you can set up on any modern online trading platform. They essentially let you set up an order to come into effect when a variable such as price reaches a certain amount.
Such pending orders are useful as they can act as a safety valve to make sure that you don’t lose too much. Plus they give you the added benefit of being able to set the orders and then walk away leaving them to do their work.
But in terms of the differences of buy limit vs buy stop, they work in entirely different ways. A buy limit order makes sure that you only execute a trade after the market price falls below a price set by you. Conversely a buy stop order will come into effect when an asset reaches a minimum market price.
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So let’s have an order for buy stop explained in a little more detail. This is where you set the order to only sell an asset when a minimum market price has been reached.
For example, you might want to sell your euro assets, but only when they have reached a value of €0.90 against the US dollar. This means that you’ll lock in your sale at a price that makes sense to you, and you won’t even have to be present at the trading platform for the sale to take place.
We can’t have a discussion for buy limit vs buy stop orders without noting some disadvantages of using these pending orders. The most important thing to mention is the fact that some pending orders might initiate the trades too slowly for the fast movements of the market prices.
Such ‘slippage’ can occur during those times of high volatility and should be factored in when using pending orders at CAPEX. Plus we should note the fact that there’s always the chance that the market won’t reach the levels set by your pending orders which means that no trades would take place.
Any decent online trading platform will let you use pending orders. At CAPEX, we feature our own WebTrader along with the MetaTrader 5 platform. Both of which allow you to put your knowledge of buy limit vs buy stop orders to good use.
You will easily be able to put down a buy limit order by setting the maximum value for which you will buy a particular asset. Once you’ve done this, you can simply select the quantity of the asset that you wish to purchase. After doing this, you can walk away safe in the knowledge that the buy limit order will work on your behalf. It’s a similar process to using a buy stop order only that you’ll be setting the minimum market price that triggers your trading software to sell your asset.
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Once you know the difference between buy limit vs buy stop orders you’ll easily be able to apply them to your trades at CAPEX. Pending orders like these are commonly used across Forex pairings such as USD/CAD, EUR/GBP and so on. However, you’ll find that the order can be invaluable for buying and selling a variety of assets.
All of the CFDs featured at CAPEX can be traded with these pending orders. This means that you can buy Apple stock CFDs via a buy limit order when they dip below a certain maximum value. Or you could set a buy stop order to sell S&P 500 index CFDs once it hits a minimum market price.
Now that we’ve had buy limit vs buy stop orders explained, we can see that both are invaluable tools for online trading. A buy limit order will ensure that you’ll only buy at a maximum price to ensure that you’re not paying too much. A buy stop order lets you sell an asset once it’s reached a minimum price to ensure that you get the best value from your trades.
While these pending orders are commonly used for Forex pairings, they work great across all of the CFDs featured here at CAPEX. So register your account and see how you can make your knowledge of buy limit vs buy stop orders work for you.