Buy Stop: Buying the Breakout
A buy order placed above the current price: it automatically buys when the price breaks out upward.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · Forex: Pending Orders & Risk, lesson 4: “Buy Stop: Buying the Breakout”
A buy order placed above the current price: it automatically buys when the price breaks out upward.
Chase once it breaks out
A Buy Stop sits above the current price. You're not sure it will rise, but if price breaks through resistance, the uptrend is confirmed, so you buy with the trend.
The risk of a false breakout
If price pokes through the order price and immediately turns around, a Buy Stop makes you buy at the top. That's why Stop orders usually go together with a stop-loss.
Placed just above resistance
Wait for a real breakout above resistance before getting in: the order price usually sits a few pips above resistance to reduce the chance of being fooled by a false breakout.
Key takeaways
- A Buy Stop sits above the current price, usually just above a resistance level.
- You expect the price to break through resistance and keep rising.
- Buy Stop and Buy Limit are both buy orders, but one chases a breakout while the other waits for a dip.
- A false breakout can make a Buy Stop buy at the top, so pair it with a stop-loss.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Press ▶ to play the default "Breakout up" scenario and watch the order fill automatically once price breaks through the line.
- Switch to the "Rally, then fall" scenario and play again: after the Buy Stop fills, what's the final floating P&L? Did you buy at the top?
- Go back to "Breakout up" and set the order price to +60 pips: does it still trigger? Earlier or later than at +25?
- Compare it with a Buy Limit: both are buy orders, so why does one sit above and the other below?
Quiz and explanations
- 1. You want to go long if the price breaks above resistance at 1.0900. What should you place?
- Answer: Buy Stop 1.0900.A buy order above that triggers on a breakout → Buy Stop.
- 2. What's the difference between a Buy Stop and a Buy Limit?
- Answer: A Buy Stop sits above to catch a breakout; a Buy Limit sits below to wait for a dip.Same direction, opposite placement and logic.
- 3. Your Buy Stop at 1.0900 fills, but the price only reaches 1.0905 before dropping back to 1.0870. What's your unrealized P&L now?
- Answer: −30 pips.Fill price 1.0900, current price 1.0870: −30 pips. That's the cost of a false breakout.
Terms in this lesson
- breakout (Breakout): Price decisively moving past support, resistance or a pattern boundary, often on rising volume.
- Buy Stop: A buy order placed above the current price: you buy into the move when price breaks out upward.
- false breakout (False Breakout): Price briefly moves past a key level, then quickly falls back into its old range.
- pip (Pip): The smallest standard price unit in forex; for EUR/USD, 1 pip = 0.0001.