Challenge Your Exam Readiness With Our Free Series 3 License Practice Questions

A buy stop is placed above the current market to trigger into a long position as prices rise. The standard trigger is when the stop price is touched or penetrated on the bid for buy stops (and on the offer for sell stops), confirming upward momentum. Once triggered, the order becomes a market order and can be filled at the prevailing price, which may be above the stop due to slippage. Choice A reverses bid/offer logic. Choice C describes a stop-limit, not a stop-market. Choice D is incorrect; a buy limit is placed below the market to improve price, whereas a stop is a momentum entry/exit or protective device. Series 3 candidates must recognize order qualifiers—stop, stop-limit, fill-or-kill, day/GTC—and how they behave on electronic matching engines, including potential gap risk where the first trade after a news event is above the stop, producing execution at worse than the stop price. Correctly specifying order type and understanding triggers helps manage risk and execution certainty.