Buy Stop Limit

The Buy Stop Limit is a complex pending order type that combines features of both stop and limit orders. This order is currently only available on the MT5 platform.

Intended Use Case

Traders utilize the Buy Stop Limit when they anticipate that the price movement of their financial instrument will first experience a temporary downswing (a pullback) after reaching a certain high, before resuming a higher movement overall.

Order Mechanism and Execution

This pending order allows a trader to specify a trigger price above the current market price, initiating a multi-step execution process:

  1. Specify the Trigger Price ("Price"): The trader sets the initial level the Ask price must reach.
  2. Automatic Placement: If the Ask price reaches the specified "Price," a Buy Limit order is automatically placed.
  3. Define the Execution Level ("Stop Limit Price"): This new Buy Limit order is set at a lower price level, known as the Stop Limit price.
  4. Order Activation: The position is only opened (the Buy Limit order is triggered) if the Ask price drops down to the specified Stop Limit price.

Detailed Summary

The Buy Stop Limit is a sophisticated pending order type, available exclusively on the MT5 platform, that integrates elements of both stop and limit orders. Traders use this order when they expect the price of an asset to first hit a high trigger level, undergo a temporary pullback (downswing), and then reverse upwards again. The mechanism involves setting a trigger price; once reached, an automatic Buy Limit order is placed at a lower specified Stop Limit Price, and the position is only executed if the market price drops to this lower level.

Key Takeaways

  • The Buy Stop Limit is a complex pending order type combining stop and limit features.
  • It is currently only available on the MT5 platform.
  • It is used when a trader anticipates a temporary price pullback (downswing) after an initial high, followed by a resumption of the upward trend.
  • Execution is a multi-step process initiated by specifying a Trigger Price ("Price").
  • When the Ask price reaches the Trigger Price, a Buy Limit order is automatically placed.
  • This new Buy Limit order is set at a lower price level called the Stop Limit Price ("Execution Level").
  • The position is only opened (activated) if the Ask price subsequently drops down to the specified Stop Limit Price.