If you’re trading for a prop firm, you already understand one thing: rules are not a suggestion—they’re the key to your account’s existence. Prop firm challenges and funded stages are filled with risk limits, daily loss limits, and maximum drawdowns that can feel like balancing on a high wire. One misstep, and you’re out. But here’s the best part—MetaTrader 5 (MT5) provides you with a set of order types that can assist you in handling trades without getting stuck on the rules.
So let’s discuss how appreciation and application of the appropriate MT5 order types can keep you on the firm’s good books and your account safe.
Why Order Types Even Matter in Prop Trading
Why does this even matter? In prop firm trading, it’s not all about making money. You might be killing 200-pip winners all week and still lose your account if you’re breaking risk rules. That’s where the right order types become your best buddy.
Having the right type of order in MT5 can:
- Stop accidental overexposure
- Assist you in entering or leaving the very price levels you intended
- Minimize slippage (which can seriously screw with your stop-loss calculations)
- Prevent emotional trading during volatile markets
Yeah, so it’s not simply a matter of choice. Order types are tools within your risk-management toolkit. Now, let’s dissect them.
Market Orders: Quick, But Not Necessarily Nice
What They Are
Market orders are the easiest of them all. You click sell or buy and you’re in the trade at the next available price.
Why They Matter in Prop Trading
Market orders are excellent when you have to get in or out in a hurry—like if news just broke and the market’s taking off. But they have a downside: slippage. During volatile markets, the price you see and get can be far apart.
Now consider entering a trade with a tight stop, and due to slippage, your real entry is worse than you’d hoped. Your stop is taken out prematurely. That can set you back a daily loss limit, or worse—cause you to fail the challenge entirely.
When to Use Them
Use market orders when:
- You absolutely must get in or out as quickly as possible
- Volatility isn’t totally out of control
- You’ve got a little flexibility with your stop
Pending Orders: Your Risk-Management Safety Net
This is where MT5 excels—pending orders allow you to look ahead, stick to your plan, and not respond to the moment. There are four key ones you’ll use.
Buy Limit / Sell Limit Orders
These are for when you need to buy low or sell high.
- Buy Limit: You set it below the current price, hoping that the market will drop and then rise.
- Sell Limit: You put it above the market price, hoping the market will go up and then come back down.
Why Prop Traders Love ‘Em
These orders keep you disciplined. You’re not running after price. You’re allowing the trade to come to you. That minimizes overtrading—one of the most prevalent challenge killers.
And you’re dictating your entry price, which equals tighter stops and improved reward-to-risk ratios.
Use Limits When:
- You’re sure about support/resistance levels
- You want accurate entries
- You’re seeking reversals
Buy Stop / Sell Stop Orders
Now these are for traders of breakout.
- Buy Stop: You put it above the price, anticipating the market to rise further after breaking a level.
- Sell Stop: You put it below the price, anticipating the market to fall lower after breaking support.
Prop Firm Rule Advantage
Stops allow you to capture momentum without being stuck to the screen. And more importantly, they allow you to pre-define your trade with an in-built stop-loss, which means you can stay within those prop firm risk guidelines.
Consider placing a buy stop with a 1% risk limit. If the trade is triggered, your risk is already determined. No surprises. No violations.
Stop Loss & Take Profit: Your Built-In Rule Protectors
Alright let’s talk about two features that aren’t “order types” per se but are attached to nearly every order type you use—and they’re critical for prop traders.
Stop Loss: Your Last Line of Defense
If you don’t use a stop loss you are either reckless or just asking to blow the account. No shame—we’ve all been there. But in prop trading, it’s not optional.
MT5 allows you to add a stop loss to any order—market or pending. And here’s the magic: once established, it’s implemented server-side. That means it works even if you lose your connection or you doze off.
When the market reaches your stop, you’re out. No additional losses. No rules broken. Just managed damage.
Take Profit: Know When to Walk Away
Prop shops pay you for consistency and managing risk—not only large winners. Having a take profit keeps you from becoming greedy. Lock in profit and exit. Easy.
Utilizing both SL and TP keeps your trades within a clearly defined framework, which is precisely what funded shops like to observe.
One-Cancels-the-Other (OCO): Sophisticated but Extremely Convenient
Suppose you don’t know whether the market is going to break up or down from a key point. You can put in a buy stop above and a sell stop below, but then there’s the issue: what if they both trigger?
That is where OCO orders are used.
MT5 does not natively have this option, but you can fake it with expert advisors or scripting. The premise is, when one order is triggered, the other is canceled out automatically.
This is pure gold in prop trading—particularly for news releases or consolidations. It saves you from being double-exposed, which can immediately toss your risk parameters into disarray.
