Buy stop order

A buy stop carries a trigger price rather than a limit price. It rests above the current market and does nothing until the market trades at or through the level, at which point it becomes a market order and is filled at whatever price is available then. That conversion is the whole of the mechanism and it is what separates a stop from a limit: a limit sets a boundary on price, a stop sets a condition for release.

Because the released instruction is a market order, the fill can be worse than the trigger. In a fast market or across a gap the first available price may sit some distance beyond the level, and that difference is slippage. The same order type serves two unrelated purposes. Placed above a level that has been containing price it participates in a move through that level; placed above an open short position it closes that position when the market moves against it, which is the ordinary stop loss on a short.

Two things are commonly missed. The trigger is evaluated against the side of the quote that would execute the order, the ask for a buy, so a level reached on the chart, which is usually drawn from bid prices, is not the same instant as a level reached by the trigger. And resting stop instructions cluster just beyond well watched chart levels, so the band immediately above a prominent high tends to hold a concentration of orders that release together, which is one reason a move through such a level can be abrupt.