The four, in one table
There are only four pending orders, and their position relative to price is what gives them meaning:
| Order | Placed | Logic |
|---|---|---|
| Buy Limit | below price | buy the dip — reversion |
| Sell Limit | above price | sell the rally — reversion |
| Buy Stop | above price | buy the breakout — continuation |
| Sell Stop | below price | sell the breakdown — continuation |
The rule that compresses the table: limit bets on reversion, stop bets on continuation. A mean-reversion strategy lives in the limit column and a breakout strategy in the stop column — using the wrong column means entering against your own logic on every trade.
Price versus certainty
Order types are not a list to memorise but three questions: when do I get in?, when do I take profit?, and when do I get out at a loss? Each order type answers one of them.
This family works from one moment: gold at 2,400.00. A market order buys now; a limit order waits at 2,380 for a better price that may never come; a stop order buys at 2,420, a worse price bought with confirmation. The difference is not technical — it is an explicit trade of price against certainty.
A worked example
Gold at 2,400, with two possible readings. If you see 2,380 as support that will hold, you are in reversion logic: buy limit 2,380. If you see 2,420 as resistance that, once broken, continues higher, you are in continuation logic: buy stop 2,420.
Both readings are technically valid, but they do not coexist in one trade. Placing both "to be ready either way" is not preparedness but the absence of a decision — one of the two will necessarily be entered on a wrong premise.
Common mistakes with this term
- Placing orders in both directions to avoid deciding, which guarantees one entry on a wrong premise.
- Leaving pending orders live through news or the weekend, so they trigger inside a gap far from the plan.
- Using a type that contradicts the strategy logic, entering a reversion method on breakouts and vice versa.