Know the type of your order in forex trading
It is important for every trader to understand the different types of orders in trading, as the trader can then determine which order type is best suited for his trading strategy.
There are basically two types of orders:
1. Market Orders
- Buy Order
- Sell Order
2. Pending Orders
- Stop Order
✤ Buy Stop Order
✤ Sell Stop Order
- Limit Order
✤ Buy Limit Order
✤ Sell Limit Order
1. Market Orders:
These types of orders can be buy or sell orders which are to be executed immediately. The execution is guaranteed but the execution price may not be. This means that the execution will take place either at or near the current bid or current ask price.
- Buy Order:
This is an instruction to buy a currency at or near the current ask price. There may be slippage due to the time lagging between placing the order and execution of the order.
- Sell Order:
This is an instruction to sell a currency at or near the current bid price. This may also suffer slippage due to the time lagging between placing an order and execution of the order.
2. Pending Orders:
These types of orders can be buy or sell orders that will only execute when the conditions that are set by the trader are fulfilled.
- Stop order:
This is a type of pending order that can be a sell or a buy order. This trade will be executed only when the market hits a certain point that is set by a trader above or below the current market price.
– Buy Stop Order:
This is a pending stop order in which a buy order is placed and will be executed automatically when the market hits the price set by the trader above the current market price.. The buy stop order will then convert to a buy order.
– Sell Stop Order:
This is a pending stop order in which a sell order is placed but the position in the market will open when it hits the price set by the trader below the current market price.
The sell stop order will then convert to a sell order.
- Limit Order:
This type of pending order aims at buying or selling at a specific or better price. Limit orders are not guaranteed, which means that the limit order will not be executed if the set conditions are not fulfilled.
– Buy Limit Order:
The price in buy limit order is set below the specified maximum price level. Traders anticipate that the price value will go down and touch your set price and will go up in the opposite direction.
– Sell Limit Order:
The price in sell limit order is set above the specified maximum price level. Traders anticipate that the price value will go up and touch your set price and will go down in the opposite direction.
These order are available in both MT4 and MT5 platforms that are provided by brokers like:
Moreover, these brokers offer a low latency trading environment which means that the orders are placed at the best prices, with minimal slippage.
Traders who are scalpers or swing traders prefer placing market orders. And the traders who seek to hold positions in the market prefer pending orders. It is advisable to use stop loss with both stop orders and limit orders to avoid unnecessary losses.
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