A market order prioritises execution, not a guaranteed price. A limit order requests a specified price or better but may remain unfilled. A stop order becomes eligible after a trigger, yet its filled…
Understand the mechanism
A market order prioritises execution, not a guaranteed price. A limit order requests a specified price or better but may remain unfilled. A stop order becomes eligible after a trigger, yet its filled price can be worse in a gap. A stop-limit caps acceptable execution price but can fail to execute when the market jumps beyond its limit.
Before applying this topic in a live market, write down the information available before the decision. Distinguish a fact confirmed by a platform specification or official source from an interpretation drawn from a chart. If a key data point is missing, treat it as unknown rather than filling it with a convenient estimate.
Worked example or scenario
Imagine a sell stop at 1.1000 around a news release. If the next tradable bid is 1.0970, the actual exit may be near 1.0970 depending on liquidity and venue rules.The numbers and scenarios in this example are educational illustrations. They are not live quotes, account-specific contract terms, backtested guarantees or a suggestion to place this trade. Consider how the outcome changes when costs, a different contract multiplier, or a faster market are introduced.
Common mistakes and limitations
Describing all stop-loss orders as guaranteed fills or ignoring the distinction between a trigger and an execution.
Check whether any assumption depends on a fixed spread, a guaranteed fill, a historical relationship remaining stable, or the availability of a financial product in your country. In practice, execution rules and platform legal entities differ. A correct formula using an incorrect contract multiplier can still produce a dangerously wrong position size.
Four-point practical checklist
- 1
Step 1
Identify the exact instrument and contract terms before doing any arithmetic.
- 2
Step 2
State the risk and assumptions in account currency, not only in chart points.
- 3
Step 3
Check current primary-source information and write down what could invalidate the idea.
- 4
Step 4
In a demo account, inspect order history and identify requested price, trigger, fill and difference.
Practice assignment
In a demo account, inspect order history and identify requested price, trigger, fill and difference.
Complete the task in a journal, spreadsheet or demo account and keep a record of your assumptions. If you are unable to explain the possible loss in your own account currency, do not substitute a larger position for a missing calculation.
Reflect and self-check
Does understanding this lesson guarantee profit?
No. Understanding mechanisms helps evaluate decisions; it cannot predict market movements or remove trading losses.
Can I use this lesson with any broker?
The principles may transfer, but prices, product rules, contract multipliers, protections and country eligibility must be checked for each provider.