Buy stop

When trading Forex, you often think that if the rate reaches a certain level, it will definitely continue to rise. Placing a buy stop pending order can help you catch this moment.

Buy stop is one of the pending orders that allows you to open a buy position at a price higher than the existing one.

Forex terms such as buy stop relate directly to trading techniques, as they help organize the exchange trading process.

This order is primarily used in trend trading, in situations where a breakout of a resistance line or one of the key price levels is predicted.

The buy stop order is based on the theory that the trend will continue after a breakout has occurred. Typically, the breakout is triggered by an important event that positively impacts the exchange rate.

Buy stop installation example.

The market is currently in an uptrend, with the price steadily moving higher, currently at 1.3485. The nearest significant level is 1.3500, so we'll place our pending order at this point (in practice, it's recommended to add 5-10 pips to the level).

We'll set our take-profit at 1.3550.

We'll set our stop-loss below the breakout point at 1.3490, in case our forecast proves incorrect and the breakout proves false. You can choose a more appropriate stop-loss value based on your situation.

After some time, the position was opened, and two hours later, it was closed when the take profit .

The support line or other levels can also be used to find buy stop points.

Forex strategies based on this order are among the simplest and most effective on the currency market. Its application requires the use of additional indicators, except perhaps for plotting the support line.