Welcome back

FOREX ORDERS

Forex orders are instructions that traders give to their brokers to execute trades on their behalf in the foreign exchange market. These orders can take several forms, each with their own set of rules and conditions.

Types of forex orders

  1. Market Orders
  2. Stop Orders
  3. Limit Orders
  4. One-Cancels-the-Other (OCO) orders
  5. Trailing stop order

THE MARKET ORDER

The market order involves an instruction by an investor to a broker to buy or sell a currency pair at the current market price. This is the simplest and quickest way to enter or exit a trade, but it does not allow for any price discretion.

THE LIMIT ORDER

The limit order entails an investor’s  instruction to the broker to buy or sell a currency pair at a specific price or better. This type of order allows traders to set a target price for their trades, but it may not be filled if the market price does not reach the specified level. There are two types of limit orders

a. Buy Limit

A buy limit order is an order to buy a currency pair at a specified lower price than it is currently. It is used to limit the price at which a trader is willing to buy a security. For example, a trader may place a buy limit order at $50 for a currency pair. If the currency pair’s price drops to $50 or lower, the order will be executed, but if the  price remains above $50, the order will not be filled.

b. Sell Limit

A sell limit order is a type of order to sell a currency pair at a specific price higher than it is currently. It is used to limit the price at which the security will be sold. This can be useful for investors who want to ensure that they get a certain price for the security they are selling, or to limit potential losses on a short sale. For example, a trader may place a sell limit order at $50 for a currency pair currently at $35. If the currency pair’s price rises to $50 or above, the order will be executed, but if the  price remains below $50, the order will not be filled.

STOP ORDERS

A stop order is a type of trade order that is used to buy or sell a currency pair when its price reaches a certain level. It is used to limit losses or protect profits. For example, if a trader owns a stock and wants to limit their potential loss, they could place a “stop-loss” order at a certain price below the current market price. If the stock falls to that price, the stop-loss order will be triggered, and the stock will be sold. Similarly, a trader could use a “stop-limit” order to automatically buy a stock when its price rises to a certain level. There are two types of stop orders used by traders in the foreign exchange market.

a. Buy Stop Order

A buy stop order is a type of stop order that is used to enter a long position in a security at a price above the current market price. The order is placed at a specific price, known as the “stop price”, and will only be filled if the market price of the security rises to or above that level.

For example, a trader might place a buy stop order for a stock at $50. If the stock is currently trading at $45 and the trader believes it will rise in price, they can place a buy stop order at $50. If the stock price reaches $50, the order will be triggered and the trader will enter a long position in the stock at $50.

Buy stop orders are typically used by traders as a way to enter into a trade when a security is breaking out of a resistance level. It’s a way to enter the market with a limit order instead of a market order, the idea is that you want to enter the market at a specific level and not to pay more.

b. Sell Stop Order

A sell stop order is a type of stop order that is used to enter a short position in a security at a price below the current market price. The order is placed at a specific price, known as the “stop price”, and will only be filled if the market price of the security falls to or below that level.

For example, a trader might place a sell stop order for a stock at $50. If the stock is currently trading at $55 and the trader believes it will fall in price, they can place a sell stop order at $50. If the stock price reaches $50, the order will be triggered and the trader will enter a short position in the stock at $50.

Sell stop orders are typically used by traders as a way to enter into a trade when a security is breaking down a support level, or as a way to limit losses on a short position by setting a stop-loss point. It’s also a way to enter the market with a limit order instead of a market order, the idea is that you want to enter the market at a specific level and not to pay more.