Confused understanding Limit Orders and Stop Orders in Forex trading, can someone explain it to me? -

It applies to any type of trading - Limit order applies to selling. You ask your broker to buy something below limit (like buy XXX at $5 or less rate). Stop order applies to selling. You want to stop your hold when price falls below a minimum (sell 200 of XXX if price falls below $3). Stop order is a way to minimize the losses. The previous response almost has it right. However, limit and stop orders can apply to both buys and sells. There is also something called a Market Order. With a market order, you tell your broker to sell at the market price. You are guaranteed execution -- but not a price. There are rules in place where they have to give you the best price available (or better). With a limit order -- buy or sell, you specify the price. There is no guarantee of execution -- but if it gets done, you get the price you asked for or better. There are priority rules put in place that ensure that you get execution at your price or better before anyone else gets a better price (limits at the same price get priority based on time -- with the market maker being put at the back of the queue). You can attach a time horixon to these trades. For example, you can make it a day trade, meaning that if it doesn t get executed within the day, it is taken off the books. You can also make it GTC -- good untill cancelled. This can be dangerous if it doesn t get executed and you forget about it. When the market crashed in 1987, a lot of people ended up buying shares that they didn t want when stale limit orders got executed. A stop order is a bit different. Stop sells are most common, but you can put in a stop buy, too. For stop sells, you put in a price lower than the current price. For stop buys you put in a price above the current price. As soon as there is a trade at that price (or worse) the market-maker has to stop the market amp; do your trade next. It will usually be at or near the stop price -- but if the market is in freefall (like the crash of 1987), the price could be way off the last price. People might use a Stop Sell to protect their profits if there is a sudden drop. While stop buys are less common, someone might execute one to buy shares if prices break through a price barrier. They may believe that the stock will either fall or take off -- and if it goes through this price, it will likely take off.