Forex Orders: A Beginners Guide on Different Types of Forex Orders

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Forex Orders: A Beginners Guide on Different Types of Forex Orders

An order may refer to an offer that was sent using your broker’s trading platform to either open or close a transaction if you are satisfied with the specific instructions you laid down. In simple words, it simply means how you as a trader will enter or exit a trade. 

There are several different types of Forex orders which are used by traders to manage their trades. These vary among different brokers, though there tend to be some basic Forex order types which all brokers accept. Getting to know these orders and have a good grasp of them can help you enter and exit the market appropriately. 

In this article, we’ll be discussing the main forex orders and how they can be utilized while trading live. 

Types Of Orders

Orders may be divided into two categories:

1). Market Order

2). Pending Order

See a tabular representation of both types of orders. 

MARKET ORDERS PENDING ORDERS
  BUY LIMIT
BUYSELL BUY STOP
SELL LIMIT
  SELL STOP

Market Orders

This is probably the most basic and often the first FX order type a trader comes across. Just like the name, these kind of orders are traded at the market. It is an order that is instantly executed against the price your broker provided. If you want to get started in the forex market immediately, you can make trade on a market order and enter at a prevailing price. 

Example:

The EUR/USD deal ticket below shows live prices to buy and sell. A market order to buy at 11392.9 would execute immediately at the current price. The same will apply to a short position.

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Note: In a fast-moving market, the price you paid or received may be different from the last price that was quoted before the order was entered. This means that you may pay a lot more or sell a lot lower than the price you thought you’d be getting-market conditions is a major determinant or market orders. 

PENDING ORDERS: This is an order to be executed at a later time at your specified price. Let’s take a look at Limit and Stop Orders.

Limit Order

This is an order placed to either buy below or sell above the market at a specific price. That is, it is an order that is validated to buy or sell the moment the market reaches the “limit price”. We have two types of Limit Orders in Forex Trading:

  1. Limit Orders to open a Trade

This is a limit entry order to get a better entry price. If the EUR/USD is trading at 1.1294 and you thought it would trade down to 1.1200 before rallying, you would place your limit order to buy at 1.1200.

If the EUR/USD is trading at the 1.12939 level and you thought it would rally up to 1.1300 before selling off, you would place your limit order to sell 1.1300. When using a limit order, you will only be filled at the price you designated or better.

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  1.  Limit orders to close a trade

It is still possible to use a limit order to close a trade when the market moves a specified amount in your favor. If you bought the EUR/USD at 1.1300 and wanted to exit when your trade showed a profit of 100 pips, you would place your sell limit order 100 pips above your entry or at the 1.1400 level.

If you sold the EUR/USD at 1.1300 and wanted to exit when your trade showed a profit of 100 pips, you would place your buy limit order 100 pips below your entry or at the 1.1200 level.

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GRAPHICAL REPRESENTATION OF A LIMIT ORDER ON A FOREX CHART 

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SOURCE: DAILYFX

STOP ORDERS

This “stops” you from executing an order until the price reaches a stop price. You use a stop order only when you want to buy after price rises to the stop price or sell after the price falls to the stop price. This means that a stop entry order is an order placed to buy above the market or sell below the market at a certain price. They are designed to specifically prevent losses. 

Variations to Stop Orders

1. Stop orders to open a trade

These orders can be used for trading breakouts and they are the first stop to enter into the market. If you thought the EUR/USD would rally further after a move above the 1.1500 level, you would place a buy stop for entry at 1.1501. As the market printed 1.1501, your buy stop would become a market order and be filled at the next best price available.

If you thought that the EUR/USD would continue moving down if it traded down through the 1.1200 level, you would place your sell stop for entry at the 1.1199 level. As the market printed 1.1199, your sell stop would become a market order and be filled at the next best price available. 

2. Stop orders to close a trade

You can also use a protective stop order to close a trade when the market moves a specified amount against your position. If you bought the EUR/USD at 1.1500 and wanted to limit your risk to 50 pips, you would place your protective sell stop 50 pips below your entry or at the 1.1450 level.

If you sold the EUR/USD at 1.1400 and wanted to limit your risk to 50 pips, you would place your protective buy stop 50 pips above your entry or at the 1.1450 level.

Takeaway: A stop order can only be executed when the price seems to be less favorable to you. 

GRAPHICAL REPRESENTATION OF A STOP ORDER ON A FOREX TRADE
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PLACING A FOREX ORDER

Forex orders are quite easy and simple to place, subject to the broker. Here are some guidelines to follow to place a forex order:

  1. Tap open a deal ticket and select the “Order” tab.
  2. Select the direction of the trade (Buy or Sell).
  3. Choose a specific price level which will consequently determine the type of order depending on whether the level is above/below the current market price.
  4. Place stops or limits.
  5. Then submit the order.

In conclusion, it’s important to remember that you should get familiar with the platform you are working with before undertaking any form of trading activity. This can help reduce any impractical errors when executing or managing a trade.


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