Buy Stop

A buy stop is a stop order placed above the current market price. It sits dormant until price rallies up to the trigger, then converts to a market buy order. Traders use buy stops to enter long positions on breakout setups — you want to buy ABOVE resistance, not below it, because the breakout itself is your confirmation. Buy stops are the bread and butter of breakout traders. Instead of staring at the chart waiting for resistance to break, you place the buy stop a few pips above the resistance level and let the market come to you. If price breaks out, you're in. If it doesn't, you cancel the order and look for the next setup. The risk is slippage on news events. A buy stop during NFP can fill 20+ pips above the trigger price when the market gaps. For news plays, use a buy stop-limit instead.