You can get in the markets through two ways. You can click on the buy or sell buttons on the trading platforms, or you can set pending orders and wait for the markets to trigger them. The second way is not that popular among traders. However, in case you receive signals from other parties, you must know how to set pending orders because most of their signals come as sell limit, sell stop, buy limit and buy stop orders that are pending orders that have to become set and keep waiting for the market to trigger them. In this article, I am covering the sell limit vs. sell stop orders, their differences, and the way you must set them. You can make mistakes if you don’t know how to do it, and so you can lose, or miss a good movement, because the sell limit and sell stop orders are really different from each other.
Sell Limit vs. Sell Stop Orders
Sell limit is a sell pending order that you set above the current market price, whereas sell stop is a sell pending order that you set below the current market price. This is the only difference. Both of them are sell pending orders. It means they sell and take a short position when they become triggered.
In case of a sell limit order, you set it because your analysis tells you that if the price goes above a level, or breaks below a support level or line, you will have a short trade setup or sell signal, and it is the right time to sell. However, as you may not be at the computer when this happens and the price goes down and reaches that level, you set a sell limit pending order. This pending order doesn’t take any positions for you. It stays in your account and waits for the price to reach that level, and then the system will trigger the order once the price gets there, while you may not be at the computer. The good thing is that you can even set stop loss and target levels with your sell limit order.
For example, let’s say EUR/USD’s current price is 1.1922 and you want to sell if the price goes up and reaches 1.1952 which is 30 pips above the current price. You should set a sell limit at 1.1952. You can even set the stop loss, for example 40 pips above the entry price which is 1.1992. You can also set a target level.
The question is, how can you set a sell limit order on the trading platform? Different platforms have different features to set pending orders. Below, I will explain how you can do it on MT4 or MT5 that are the most popular trading platforms.
How to Set a Sell Limit Order on MT4 and MT5
There are two ways to set a sell limit order on MT4. The first way is the harder way that needs you to choose the sell limit, enter the entry price for the sell order, set the stop loss and target. So, I start from this method because it is good to know it. Then, I will show you the easier way that doesn’t even need you to know what the sell limit and sell stop orders are and what their differences are.
1. If you’ve decided to set a sell limit at a special price level, you can click on “New Order” button at the top of the MT4 platform, or simply press F9 to open the order dialog box:
Then, you must choose (1) “Pending Order” and then (2) “Sell Limit” and (3) enter the entry price, (4) stop loss, (5) take profit, and then click on (6) “Place”:
You can even set an expiry date/time for your sell limit order. For example, if the price doesn’t reach the 1.1952 level within the next 24 hours, you want the sell limit pending order to become canceled. Therefore, you can choose the next day’s date/time as the expiry date.
2. That was the harder way to set a sell limit order on MT4 or MT5. However, on these platforms, you don’t have to memorize what the sell limit and sell stop orders are. You can easily set your pending order in any level that you want, by right-clicking on the price chart. As you can see in the screenshot below, the current market price is 1.1984, but you can right-click on the price, above the current market price, for example at 1.2022, and then click on the “Sell Limit” option which is at the top. MT4 or MT5 will set a sell limit pending order after this process. Then, you can refer to the platform terminal and edit the pending order (set the stop loss or target) or even delete it.
By right-clicking on the price level that you want to set the sell pending order at, the sell limit option will appear in the menu that comes after right-clicking, and you can set it without having to do anything else. You don’t even have to know whether you should set a sell limit or sell stop because it is the platform that distinguishes this, based on the price level that you right-click at.
In case you want to take a short position (you want to sell) at a special price level, if you right-click above the current market price, MT4 and MT5 give you the sell limit option, and if you right-click below the current market price, these platforms allow you to set a sell stop. It means, you can set a sell pending order at the price levels you want, no matter if you know what the sell stop and sell limit are and what their differences are.
How to Set a Sell Stop Order on MT4 and MT5
Now that you learned about the sell limit, you know how to set a sell stop order. They are almost the same. The only difference of sell limit vs. sell stop is that you set a sell limit order above the current market price, but sell stop order is for the instance that you want to take a short position when the price goes below the current market price.
There are two ways to set the sell stop orders too. The first way is the hard one that needs you to know the difference of sell limit and sell stop. It is through clicking on the “New Order” button and having the order window opened. In this case, you choose the sell stop and then you enter the price level that you want the platform to sell when the price reaches that level. In case this level is below the current market price, you must choose the “sell stop” as the order type. You can set the stop loss and target levels too.
The second way is through right-clicking on the price chart. In case you want to sell or take a short position if the price goes down and reaches a special level, you must right-click on the price chart, at the level that you want the platform to sell when the price goes down and reaches that level.
The video below shows you how to set sell limit vs. sell stop orders on MT4, and also the way you can modify or delete these pending orders. As you see, you can decide where to set the pending orders, based on the price level you want them to be placed, no matter what their names are and whether you know the difference of sell limit sell stop orders:
What Is the Difference of Sell Limit vs. Sell Stop in Trading?
Now that you know what sell limit and sell stop orders are, and what are their differences, I’d like to add something more to your trading arsenal and ask you, do you really have to use these pending orders? Aren’t they risky?
Unless you know that the market will follow the direction that you have predicted, and while you take only 2% risk in each position, it doesn’t make sense to use the sell limit and sell stop orders. Some traders set these kinds of pending order above/below any support/resistance levels they locate on the charts. Does it mean that the market has to react to all these levels as per your expectation? No.
Although trading platforms like MT4 and MT5 allow traders to set pending orders, in most cases you can lose money if you leave your trading to these kinds of methods in placing the orders.
The only instance that it makes sense to use sell stop and sell limit (or buy stop and buy limit) orders is when you are using a reliable and strong trading signals service that you have already tried on a demo account and you are 100% sure about its strong performance. Only in this case, if such a signal service sends you buy/sell signals in the form of sell stop, sell limit, buy stop and buy limit orders, you can set these kinds of pending orders, otherwise you must be so careful.
Let me give you some examples that shows you the application of sell limit vs. sell stop orders:
A Sell Stop Order that Works After a Support Breakout
Below is the EUR/USD price chart. As you can see, there is a strong uptrend with a support line (learn about chart analysis here). Most probably, the price will go down if the price breaks below the support line. Therefore, in case you think you cannot be at the computer when the breakout happens, you can set a sell stop order below the support line:
A Sell Limit Order that Works When the Price Reaches a Resistance Level
You can see the EUR/USD daily chart below. As you see, there are two strong resistance levels that you expect the price to go down when it reaches them. Therefore, you can set sell limit orders below or around these resistance levels:
So, thanks to the power of the strong platforms like MT4 and MT5, you don’t have to be worried about the differences of sell limit vs. sell stop orders at all. You can easily set them by right-clicking on the charts. However, what you must be worried about is the strength of your trading strategy, setting a proper stop loss and risking no more than 2% in each position. Sell limit and sell stop orders are strong tools when you receive strong signals from a reliable service, or you are confident enough about your trading strategy.