Pending order

An order lodged in advance rather than executed now. Four basic forms are named by direction and by which side of the current quote they rest on: a buy limit and a sell limit sit at prices better than the market, and a buy stop and a sell stop sit at prices worse than it. Stop limit variants combine the two, becoming active at one level and then working as a limit order at another.

Activation and execution are separate events. The order is watched against the quote, and the trigger is read on the side of the quote the eventual deal would be done on, so a buy is triggered by the ask and a sell by the bid. Once triggered, a limit is filled at its level or better or not at all, while a stop becomes an order to deal at the market and takes the next available price, which is where slippage enters. How long the order waits is set by its time in force: to the end of the trading day, until a stated date, or until it is cancelled.

Three misreadings are common. A pending order is not a guarantee of a fill at its level, and in a gapping market a stop is filled at the first price available beyond the gap. Margin is not reserved while an order waits, so the requirement is checked at activation rather than at placement, and an order can be rejected on triggering in an account that could have supported it when it was set. And an order that was never triggered is not a cancelled order: it remains live, and a market that returns to the level days later will activate it unless the instruction has been removed.