Forex limit orders

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An Introduction to Forex Orders.

An Introduction to Forex Orders.

You can use several different types of orders to make and control your trades in forex trading. Some orders control both how you enter and how you exit the market. Learning what they all mean can go a long way toward successful trading.

Market Orders.

Market orders are executed live on the market at the current price. You're telling the broker that you don't care about the spread as much as you care about entering the market right now.

A market order can be used to open or close a trade at the market price.

Limit Orders.

Limit orders are typically those that are used to exit the market in profit. If you're going long, the limit order will be above the market price, and if you are going short, the limit order will be below the market price. Think of a limit order like a finish line. Your trade will be closed when the market price crosses the limit order and your profit will be realized to your account balance.

Stop Orders or Stop Loss Orders.

A stop order is also an exit order that will close your trade. Commonly referred to as a stop loss order or a protective stop order, this type of order is intended to limit the amount of loss incurred by your trade. A stop loss order will close your trade at a designated level of loss. Stop losses can also be used to lock in gains as your trades progress into profit. Stop losses can be painful when they're hit, but they'll keep you in the trading game longer than if they're not used.

Entry Orders.

Entry orders are those to enter the market at a specified price. It's almost impossible to monitor the market every second, and this is why an entry order can be handy. If you feel the market may take a certain action such as break through a price that it's been touching but hasn't yet been able to break, you would want to use an entry limit order.

When the price crosses your entry limit order, you're in the market.

But entry orders can be a double-edged sword. The advantage is that you can enter the market when it moves while you're away or not paying attention. The disadvantage is that the market can touch your entry order and take it negative before you have a chance to evaluate the move. This is where good risk management practices come into play.

Do Your Homework.

Understanding different types of forex orders and their uses is an essential basic skill. Take the time to study them and try them out using a demo account before you take the plunge.

Note: Always consult with a financial professional for the most up-to-date information and trends. This article is not investment advice and it is not intended as investment advice.

Forex orders.

Limit Order.

An order to buy or sell currency at a certain limit is called Limit Order . When you buy, your order is carried out when the market reached down your limit order price. When you sell, your order is carried out when the market reaches up your limit order price. You can use it to buy currency below the market price or sell currency above the market price. There is no decrease with limit orders.

Market Order.

The second one is Market Order . It is an order to buy or sell at the running market price. Market orders should be used very carefully as in fast-changing markets there is sometimes a disparity between the price when the market order is given and the actual price of the deal. This occurs because of market decrease. It can lead to a loss or gain of several pips. Market orders can be used to enter or exit a trade.

One Cancels the Other (OCO)

One Cancels the Other (OCO) order is used in case if one simultaneously places a limit order and a stop-loss order. If either order is carried out the other is abrogated which lets the broker to make a deal without supervising the market. Once the market reaches up the level of the limit order, the currency is sold at a profit but when he market falls, the stop-loss order is used.

Stop Order.

The last one is Stop Order , which is an order to buy above the market or to sell below the market. It is usually used as a stop-loss order to diminish losses if the market behaves opposite to what the broker supposed. A stop-loss order lets sell the currency if the market goes below the point appointed by the broker. In forex market there are four various types of stop orders.

Chart Stop order is a technical analysis that lets elaborate many possible stops caused by the price charts' action or by different technical indicator signs. The swing high/low point is often used as an example of a chart stop is like. In the figure, a broker with our suppositional $10,000 account dealing with the chart stop can sell one mini lot at the risk of 150 points, or approximately 1.5% of the account.

Another type of the chart stop is Volatility Stop order ; it uses volatility instead of price action to fix risk parameters. The sense of it is that when prices strongly fluctuate, the broker has to adapt to the current conditions and let the position more space for risk to avoid being stopped out by intra-market noise, so it is a situation of high inconstancy. On the contrary, can be a situation of a low inconstancy, in which risk parameters would need to decrease.

The volatility stop also lets the broker use a scale-in approach to get a better "blended" price and a faster breakeven point in this following Figure. The joint risk position exposure should not be more than 2% of the account. Therefore, it is extremely important that the broker use smaller lots to size his or her joint risk in the trade.

Equity Stop order is definitely the easiest of the four stops orders. The risk is only with the predetermined amount of one's account on a single trade. On a suppositional $10,000 trading account, a broker risks $300, which is approximately about 300 points, on one mini lot (10,000 units) of EUR/USD, or only 30 points on any dealt. Sometimes brave traders choose to use 5% equity stops. However, it is important to realize that this sum is the upper limit of reasonable money management, as ten consecutive wrong trades would decrease the account by 50%. However, the equity stop order puts an arbitrary exit point on a trader's position - and this is it is only but a great weak point. The trade is sometimes abolished to meet the trader's internal risk controls and not because of a logical response to the price operation of the marketplace.

Finally, Margin Stop order can serve as an effective method in forex market, if the broker uses it prudently though it is used less than other money management strategies. forex markets function uninterruptedly that is why forex players can wind up their customer positions immediately when they trigger a margin call. That is why forex customers are seldom in danger of generating a negative balance in their account as computers are supposed to close out all positions.

According to this strategy, the trader should divide the money into ten identical parts. Therefore, if the capital were $10,000 the broker would open the account with a forex dealer but only send $1,000 instead of $10,000 and leave $9,000 in the bank. Many forex market traders offer 100:1 leverage, so a $1,000 deposit would give the trader the opportunity to take control of one standard 100,000-unit lot. $1,000 is the minimum that the dealer requires and even a 1-point move against the trader would cause a margin call.

Sometimes the trader decides to trade a 50,000-unit lot position which lets him or her to get about 100 points. Just to compare, on a 50,000 lot the dealer needs a $500 margin, so $1,000 - 100-point loss multiplied on a 50,000 lot is $500. Never mind of how much leverage the trader assumed if he's ready to risk or not, this would stop the dealer from blowing up his or her account in just one trade and would let the dealer to take many fluctuations at a supposedly beneficial trap worrying of setting manual stops. This advice may be useful for the dealers who are used to risking a lot but also getting a lot.

Types of Forex Orders.

“Would you like pips with that?”

Okay, not that type of order.

The term “order” refers to how you will enter or exit a trade .

Here we discuss the different types of forex orders that can be placed into the forex market.

Be sure that you know which types of orders your broker accepts.

Different brokers accept different types of forex orders.

There are some basic order types that all brokers provide and some others that sound weird.

Order Types.

Market order.

A market order is an order to buy or sell at the best available price .

If you wanted to buy EUR/USD at market, then it would be sold to you at the ask price of 1.2142.

You would click buy and your trading platform would instantly execute a buy order at that exact price.

If you ever shop on Amazon, it’s kinda like using their 1-Click ordering. You like the current price, you click once and it’s yours!

The only difference is you are buying or selling one currency against another currency instead of buying a Justin Bieber CD.

Limit Entry Order.

A limit entry is an order placed to either buy below the market or sell above the market at a certain price.

For example, EUR/USD is currently trading at 1.2050. You want to go short if the price reaches 1.2070.

Or you can set a sell limit order at 1.2070 (then you could walk away from your computer to attend your ballroom dancing class).

If the price goes up to 1.2070, your trading platform will automatically execute a sell order at the best available price.

You use this type of entry order when you believe price will reverse upon hitting the price you specified!

Stop Entry Order.

A stop entry order is an order placed to buy above the market or sell below the market at a certain price.

For example, GBP/USD is currently trading at 1.5050 and is heading upward. You believe that price will continue in this direction if it hits 1.5060.

You can do one of the following to play this belief:

Sit in front of your computer and buy at market when it hits 1.5060 OR Set a stop entry order at 1.5060.

You use stop entry orders when you feel that price will move in one direction!

Stop Loss Order.

A stop loss order is a type of order linked to a trade for the purpose of preventing additional losses if the price goes against you .

If you are in a long position, it is a sell STO P order.

If you are in a short position, it is a buy STOP order.

REMEMBER THIS TYPE OF ORDER .

A stop loss order remains in effect until the position is liquidated or you cancel the stop loss order.

For example, you went long (buy) EUR/USD at 1.2230. To limit your maximum loss, you set a stop-loss order at 1.2200.

Stop losses are extremely useful if you don’t want to sit in front of your monitor all day worried that you will lose all your money.

You can simply set a stop loss order on any open positions so you won’t miss your basket weaving class or elephant polo game.

Trailing Stop.

A trailing stop is a type of stop loss order attached to a trade that moves as price fluctuates .

Let’s say that you’ve decided to short USD/JPY at 90.80, with a trailing stop of 20 pips.

This means that originally, your stop loss is at 91.00. If the price goes down and hits 90.60, your trailing stop would move down to 90.80 (or breakeven).

Just remember though, that your stop will STAY at this new price level. It will not widen if market goes higher against you.

Going back to the example, with a trailing stop of 20 pips, if USD/JPY hits 90.40, then your stop would move to 90.60 (or lock in 20 pips profit).

Your trade will remain open as long as price does not move against you by 20 pips.

Once the market price hits your trailing stop price, a market order to close your position at the best available price will be sent and your position will be closed.

Weird Forex Orders.

“Can I order a grande extra hot soy with extra foam, extra hot split quad shot with a half squirt of sugar-free white chocolate and a half squirt of sugar-free cinnamon, a half packet of Splenda and put that in a Venti cup and fill up the “room” with extra whipped cream with caramel and chocolate sauce drizzled on top?”

Ooops, wrong weird order.

Good ‘Till Cancelled (GTC)

A GTC order remains active in the market until you decide to cancel it . Your broker will not cancel the order at any time. Therefore, it is your responsibility to remember that you have the order scheduled.

Good for the Day (GFD)

A GFD order remains active in the market until the end of the trading day .

Because foreign exchange is a 24-hour market, this usually means 5:00 pm EST since that’s the time U. S. markets close, but we’d recommend you double check with your broker.

One-Cancels-the-Other (OCO)

An OCO order is a combination of two entry and/or stop loss orders .

Let’s say the price of EUR/USD is 1.2040. You want to either buy at 1.2095 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.1985.

The understanding is that if 1.2095 is reached, your buy order will be triggered and the 1.1985 sell order will be automatically canceled.

One-Triggers-the-Other.

An OTO is the opposite of the OCO, as it only puts on orders when the parent order is triggered .

You set an OTO order when you want to set profit taking and stop loss levels ahead of time, even before you get in a trade.

For example, USD/CHF is currently trading at 1.2000. You believe that once it hits 1.2100, it will reverse and head downwards but only up to 1.1900.

The problem is that you will be gone for an entire week because you have to join a basket weaving competition at the top of Mt. Fuji where there is no internet.

In order to catch the move while you are away, you set a sell limit at 1.2000 and at the same time, place a related buy limit at 1.1900, and just in case, place a stop-loss at 1.2100.

As an OTO, both the buy limit and the stop-loss orders will only be placed if your initial sell order at 1.2000 gets triggered.

In conclusion…

The basic forex order types (market, limit entry, stop-entry, stop loss, and trailing stop) are usually all that most traders ever need.

Here’s a cheatsheet (current price is the blue dot):

Unless you are a veteran trader (don’t worry, with practice and time you will be), don’t get fancy and design a system of trading requiring a large number of forex orders sandwiched in the market at all times.

Make sure you fully understand and are comfortable with your broker’s order entry system before executing a trade.

Also, always check with your broker for specific order information and to see if any rollover fees will be applied if a position is held longer than one day.

Keeping your ordering rules simple is the best strategy.

DO NOT trade with real money until you have an extremely high comfort level with the trading platform you are using and its order entry system. Erroneous trades are more common than you think!

Your Progress.

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