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A SELL STOP order is an essential pending order in trading that allows traders to automatically enter a short position when the price drops below a specified level. In this article, we will walk through how to place a SELL STOP order on the MT4 and MT5 platforms, using a practical example of a SELL STOP order on GBP/USD at 1.3200.
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What is a SELL STOP Order?
A SELL STOP order is a pending order where you set a price below the current market price, anticipating the price to continue falling once it reaches the specified level. The order is only triggered when the asset’s price falls to or below that level, after which the order is executed, and the trader enters a short (sell) position.
For example, if GBP/USD is trading at 1.3300 and you anticipate that the price will continue falling after it hits 1.3200, you would place a SELL STOP order at 1.3200. Once the price drops to that level, the SELL STOP order will be triggered, and you will automatically be in a short position.
Steps to Place a SELL STOP Order on MT4 or MT5
MT4 and MT5 platforms allow you to place a SELL STOP order easily. Let’s break down the steps for each platform.
Step 1: Open the MT4 or MT5 Trading Platform
Log in to your MT4 or MT5 trading platform using your demo or live account. If you are placing a real trade, make sure your account is sufficiently funded.
Step 2: Open the New Order Window
- On MT4, click the ‘New Order’ button in the toolbar at the top or press the F9 key.
- On MT5, click the ‘New Order’ button or right-click on the chart of the instrument you wish to trade (GBP/USD) and select ‘Trading’ followed by ‘New Order.’
This will open the order window where you can configure the trade details.
Step 3: Select GBP/USD Pair
Ensure that GBP/USD is selected in the’ Symbol’ section. This makes sure that the trade applies to the correct currency pair.
Step 4: Choose Pending Order as the Order Type
In the ‘Type’ drop-down, change the default selection from Market Execution to ‘Pending Order.’
Step 5: Select SELL STOP as the Pending Order Type
In the pending order type section, select SELL STOP from the list of options.
Step 6: Set the Price (1.3200)
In the ‘Price’ field, enter the price you want the SELL STOP order to trigger. For this example, you want to enter a short position once the price drops to 1.3200. So, enter 1.3200 in this field.
Step 7: Specify the Lot Size (Volume)
Next, specify the number of lots (trade size) in the’ Volume’ field. For example, if you want to trade 0.1 lot (which represents 10,000 units of GBP/USD), enter 0.1.
Step 8: Set Stop Loss and Take Profit (Optional)
You can set the Stop Loss (SL) and Take Profit (TP) values to manage risk and lock in profits:
- Stop Loss (SL): This is the price at which you want to exit the trade if it moves against you. For example, you might set a Stop Loss at 1.3300, just above the current market price, to limit your losses if the market rises unexpectedly.
- Take Profit (TP): This is the price level where you want to exit the trade to lock in profits. In this example, you could set your Take Profit at 1.3000 if you expect GBP/USD to continue falling after triggering the SELL STOP order.
Step 9: Set Expiration (Optional)
You can set an Expiration Date and Time for your order. The order will automatically expire if the price doesn’t reach your desired level within the specified time. If no expiration is set, the order will remain active until triggered or manually canceled.
Step 10: Place the Order
Once you’ve filled in all the details, click ‘Place’ on MT4 or ‘Place Order’ on MT5. Your SELL STOP order will now appear in the ‘Trade’ tab on MT4 or the ‘Toolbox’ tab on MT5.
Example: SELL STOP GBP/USD at 1.3200
Let’s use a practical example to illustrate how this works.
- Current Price: 1.3300
- SELL STOP Price: 1.3200
- Volume: 0.1 lot
- Stop Loss: 1.3300
- Take Profit: 1.3000
In this example, GBP/USD is currently trading at 1.3300, and you anticipate that if the price drops to 1.3200, it will continue to decline further. You set a SELL STOP order at 1.3200, and once the price reaches or falls below this level, the SELL STOP order will be triggered, entering you into a short position.
You also set a Stop Loss at 1.3300 to limit your losses if the price reverses after reaching your entry point. To secure profits, you can set a Take Profit at 1.3000, which will close your trade automatically if the market falls to that level.
Monitoring and Managing the Trade
Once the SELL STOP order is placed, you can monitor it in the ‘Trade’ tab (MT4) or ‘Toolbox’ tab (MT5). The order will remain inactive until the price falls to the specified level of 1.3200. The order will be triggered after the price hits 1.3200, and you will enter a short position.
You can modify or cancel the order anytime before it is triggered by right-clicking on the pending order and selecting ‘Modify’ or ‘Delete.’ After the order is executed, you can also manage the active trade by adjusting the Stop Loss and Take Profit levels.
Why Use a SELL STOP Order?
A SELL-STOP order is ideal when you expect the price of an asset to continue falling after breaching a specific support level. It’s commonly used in breakout strategies where traders anticipate that it will continue its downward momentum once the price breaks through a specific level of support.
In the case of GBP/USD, you expect that if the price drops to 1.3200, it will likely continue to fall further. By placing a SELL STOP order, you avoid entering the trade too early and wait for confirmation of the downward movement.
Conclusion
Placing a SELL STOP order on MT4 or MT5 is an effective strategy for traders who expect the price of an asset to decline and want to enter the market once the price reaches a lower level. It allows you to automate your entry point, avoiding the need to monitor the market continuously, and is particularly useful in breakout trading scenarios.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
