If you’ve spent even a minute in the prop trading community, you’ve likely heard traders use limit orders and stop orders as if they’re second nature. And if you’re trading with a funded account, knowing the difference isn’t just good sense—it can literally mean the difference between successfully passing your evaluation or blowing your account.
So let’s simplify it all. We’ll discuss what limit and stop orders really are, how they work, when you’d ever use each, and most importantly, how to wisely select when trading on another person’s money.
What Are These Orders?
Let’s not make it too complicated. At their foundation:
- Limit Orders enable you to buy cheap or sell dear. You’re telling the system, “I will only buy/sell at this precise price or better.”
- Stop Orders are your “get me in/out if price moves against me” gadget. They execute once the price reaches a point.
These are two of the most essential types of order in MT5, and while they may sound alike, they function quite differently. One is patient and choosy (limit), while the other is reactive and defensive (stop).
Limit Orders: Your Tactical, Price-Savvy Friend
Suppose you’re trading EUR/USD, and it’s trading at about 1.0850. You believe it will fall to 1.0830 before rocketing higher. You don’t want to chase. So you enter a limit buy at 1.0830. If the price falls there, you’re in—at a discount. If not, you’re out of the trade.
Limit orders are about precision. They’re saying, “I know my price, and I’m going to hold to it.”
Why Limit Orders Shine in Prop Firm Accounts
If you’re trading a funded account, your capital isn’t just yours—it comes with rules, like:
- Max daily loss limits
- Maximum drawdown thresholds
- Risk-per-trade caps
That’s where limit orders truly shine. With them, you get to dictate exactly where you enter and leave. No surprises. No slippage (or at least a heck of a lot less of it). That sort of accuracy assists you in remaining compliant with your prop firm’s risk model.
Typical Limit Order Situations:
- Entering pullbacks in trending markets.
- Exiting to take profit points with no haste.
- Scalping tight ranges, where each pip is important.
- Fading fakeouts, where price taps a level then reverses.
But limit orders don’t guarantee execution. If the price comes close but doesn’t quite hit your price? You’re left watching it run without you. Painful, right?
Stop Orders: Your Safety Net (and Sometimes, Entry Ticket)
Let’s flip the script.
Think about you’re looking at a breakout trade. Price has been consolidating for a couple of hours. You believe if it breaks above 1.0875, it’ll rocket. So you set a buy stop at 1.0876. After price reaches that point, you’re in. You don’t want to foresee the breakout—you want confirmation.
Or let’s assume you already have a long position from 1.0830. But you have a stop-loss at 1.0810. That’s a sell stop—your insurance in case things turn against you.
Why Prop Traders Use Stop Orders
In prop trading, self-discipline is not a choice. And stop orders provide you with that.
They:
- Lock in risk.
- Prevent catastrophic losses.
- Enable automating exits so emotions won’t derail you.
- Enable breakout entries without spending all day staring at the screen.
The vast majority of prop firm accounts will demand that you use stop-loss orders on all trades. Some have even automated risk management that closes your trade if a stop is not set. That’s how much risk seriously funded firms regard.
Common Stop Order Scenarios:
- Placing stop-losses in order to limit downside risk.
- Triggering breakouts, either long or short.
- Trailing stops to capture profit as price moves in your direction.
- Reversals in which you want in only if the price reverses in a particular way.
When price reaches your stop, it turns into a market order. That means slippage can getcha—particularly during nervous news events or thin-liquidity hours.
So Which Do You Use? Depends on the Mission
Here’s where most traders get hung up. They think of limit and stop orders as if one is “better” than the other.
They’re not.
They’re just tools. And like any good tool, it depends on the job.
Let’s lay out a few scenarios, from a prop firm trader’s perspective, to see what fits where.
Scenario 1: You’re Scalping Gold in NY Session
Gold (XAU/USD) is flying today, but the moves are choppy. You’re looking to grab 20-30 pips per trade.
Go with: Limit orders
Why? You need accurate entries. You’re looking for small pullbacks to enter with tight stops. You don’t want to chase. And slippage on stop orders in gold? Could destroy your R:R.
Scenario 2: You’re Swing Trading GBP/USD After NFP
GBP/USD just broke through resistance after NFP. You observe a clean breakout establishing on the daily chart. You would like to get in—but only if it continues.
Go with: Stop orders
Why? You’re anticipating confirmation of momentum. You’re fine with a little slippage if it will get you into the move. If it falters, you don’t get caught.
Scenario 3: You’re at Evaluation Stage and Can’t Take a Loss Exceeding 2%
You have three trades remaining before reaching maximum daily loss. Sloppy execution isn’t an option for you.
Use: A combination of limit entries and stop-loss exits
Why? You require controlled entries with predetermined exits. Stop-loss orders prevent you from breaking risk protocols, while limit orders get you in precisely. That combination is how you make it past exams.
