A pending order is an instruction to buy or sell an instrument at a price that will only be triggered in the future.
In other words, the trader tells the broker:
“Do not execute at the current market price, execute only if the price reaches the level I choose.”
Buy Stop triggers a buy when the market rises up to your chosen price.
- Current price is below your Buy Stop level.
- Traders use it when they expect the price to keep rising after it breaks a certain level.
Sell Stop triggers a sell when the market falls down to your chosen price.
- Current price is above your Sell Stop level.
- Traders use it when they expect the price to keep falling after breaking a level.
Buy Limit triggers a buy when the market falls down to your chosen price.
- Current price is above your Buy Limit level.
- Used when traders expect the price to drop to a support level and then bounce up.
Sell Limit triggers a sell when the market rises up to your chosen price.
- Current price is below your Sell Limit level.
- Used when traders expect the price to climb to a resistance level and then fall.
Important Note: During volatile market conditions, pending orders may not be executed at the exact price you set.
This is called slippage, and it can result in your order being filled at a better or worse price.