Buy stop order
Family II · Orders
Not to be confused with stop loss, stop limit order, stop order.
Buy stop order is a conditional order type used to enter or add to a long position when price moves upward through a chosen trigger. Until the trigger is reached, the order rests inactive; once triggered, it converts to a market order and is executed at the next available price. The fill price can differ from the trigger, especially in fast or thin markets.
Mechanics and use cases
A buy stop is placed above the current market price. It is commonly used to enter a position on a breakout, to add to an existing long position as price advances, or to limit losses on a short position. Because the order becomes a market order on triggering, slippage is possible: the actual fill may be higher than the stop price. Some venues offer stop orders with a limit price to control this risk, but those are a distinct order type.
Worked example
Suppose a stock is trading at 48.00 and a trader places a buy stop order with a trigger of 50.00.
Variations and risks
Rules for buy stop orders vary by broker and market. Some brokers accept stop orders outside regular trading hours; others do not. Some markets restrict stop orders on certain instruments. The primary risk is that the triggered market order fills at an unfavourable price, particularly in volatile conditions. A buy stop is not guaranteed to execute at the stop price.
Often confused with
- stop loss
- A stop-loss is an order intended to close an existing position at a loss, typically a sell stop for a long position, whereas a buy stop is usually an entry order placed above the market; the visible sign is that a stop-loss is on the opposite side of the current price from the position.
- stop limit order
- A stop-limit order becomes a limit order when triggered and may not fill if price moves past the limit, while a buy stop becomes a market order and fills at the best available price; the visible sign is the presence of a limit price alongside the stop price.
- stop order
- A stop order is the general category that includes both buy stops and sell stops, whereas a buy stop is specifically the buy-side version; the visible sign is the direction word 'buy' in the order name.