Beginner · Lesson 6 of 11 · 8 min read
Orders and what a trade really costs
How to get into and out of a trade, and the costs you pay on every one of them. Small costs add up faster than most beginners expect.
Market orders
A market order opens a trade straight away at the best price available right now. You always buy at the higher price (the ask) and sell at the lower price (the bid).
A market order gets you in for sure, but not at an exact price. In a fast market the price you get can be a little different from the one you saw.
Pending orders
A pending order waits until price reaches a level you choose, then opens the trade for you. There are four kinds:
| Order | What it does | Often used for |
|---|---|---|
| Buy limit | Buys below the current price | Buying a dip back to support |
| Sell limit | Sells above the current price | Selling a rally up to resistance |
| Buy stop | Buys above the current price | Buying a breakout upwards |
| Sell stop | Sells below the current price | Selling a breakout downwards |
An easy way to remember: limit orders wait for a better price, stop orders wait for price to prove itself by moving your way first.
Stop loss, take profit and trailing stops
A stop loss closes your trade automatically if price moves against you to a level you set. A take profit closes it automatically when price reaches your target. Set both when you open the trade, so a decision is made before emotions arrive.
A trailing stop follows price as the trade goes your way and never moves back. It lets a winner run while locking in some of the gain. Indicators like the Adaptive Trailing Stop and Parabolic SAR show where a trailing stop could sit.
What every trade costs
| Cost | What it is | When you pay it |
|---|---|---|
| Spread | The gap between the buy and sell price | Every trade, the moment you open it |
| Commission | A fee per lot on some account types | When you open and close |
| Swap | An overnight financing charge (now and then a small credit) | Each night a trade stays open past the daily rollover |
The spread on EURUSD is 1 pip and you trade 0.5 lots. One pip on 1 lot is about $10, so each trade costs about $5 before price moves at all.
Trade 4 times a day for 20 days and that is about $400 a month in spread alone. Trading less often, and only your best setups, is one of the easiest ways to keep more of your money.
Swaps are usually small, but they add up on trades held for weeks. Many brokers charge three nights at once on one day of the week (often Wednesday for forex) to cover the weekend. Your broker’s contract details list the exact charges.
Slippage and gaps
Slippage is getting a different price from the one you asked for. It happens most around big news, at the market open and when few people are trading. A gap is when price jumps from one level to another with no trading in between, for example over a weekend.
A normal stop loss is not a promise of an exact price. If price gaps through it, the trade closes at the next available price, which can be worse. Keeping position sizes small is your real protection.
This is also why past results always look better than real ones: tests on old prices do not feel spread, commission, swap or slippage. Count them in before trusting any strategy.
Common mistakes
- Opening a trade with no stop loss “just for a moment”.
- Trading many times a day without noticing what the spread is costing.
- Holding trades for weeks without checking the swap.
- Placing a market order right as big news comes out.
Check yourself
1. Price is 1.1000 and you want to buy only if it breaks above 1.1050. Which order do you use?
A buy stop at 1.1050.
2. The spread is 2 pips and you trade 1 lot of EURUSD. Roughly what does the spread cost you?
About $20 (2 pips × $10 per pip on 1 lot).
3. Your stop loss is at 1.0950, but price gaps from 1.0980 to 1.0900 over the weekend. Where does the trade close?
At the next available price, around 1.0900, not at your stop. That is why small position sizes matter.
Try it on BTM
For education only, not financial advice. Trading carries a high risk of losing money, especially with leverage. Only trade with money you can afford to lose.
For educational purposes only. Nothing here is financial advice. Past performance does not guarantee future results, and trading carries a high risk of losing money, so only trade with money you can afford to lose. Read the risk warning.