When trading forex, you can order or instruct your brokers to open or close a trade.
Using these forex orders is best when you’re nowhere near your phone. Remember, the market constantly spikes up and down, and you’ll be doomed when it moves without you knowing.
Learn here how you can effectively maximize these trading orders to mitigate losses and lock in your trading profit.
Lesson Highlight
- Each broker may offer different forex orders.
- All brokers provide market buy and market sell orders.
- Market orders allow traders to execute trades by themselves as soon as the order is placed.
- Limit orders allow traders to automatically enter and exit their trading position once the market reaches their desired buy or sell price.
Market Order
If you’re new to forex trading and want to kickstart your journey, the first order you must know is the market order. This order is the most basic and common forex order you’ll encounter.
A market order executes your trade as quickly as possible at your desired market price with minimal slippage. It allows you to buy a position at the lowest price and sell it at the highest price in the existing market.
Remember, forex moves fast; you want to execute your trade at the best price to put you on potentially profitable opportunities.
Limit Order
The rule of thumb in forex is to buy a position when the value is relatively low and sell once it rises.
With the limit order, you can order your broker to buy or sell a position once the market reaches your limit price.
What you’ll do here is to set your price limit at either below the market price or above it. But, of course, that depends on what type of limit order you want to execute.
- Buy Limit: You set a price limit at or below the market price to buy the lowest value of the market at the time of entry.
- Sell Limit: You set a price limit at or above the market price to sell your security at the highest price at exit time.
Technically, it follows the forex trading principle as the broker will only trigger the Buy Limit and Sell Limit orders once the market prices become favorable to your position.
Stop-Entry Order
Stop-entry orders are your friend if you can’t actively monitor the market but want to enter a position at a specific market price.
When you set a stop-entry order, you instruct your broker to automatically enter or exit a position once it reaches your pre-determined level.
- Buy Stop: You set a buy stop above the current market price. The broker automatically enters a trade once it reaches or goes through the buy-stop level.
- Sell Stop: You set a sell stop below the current market price. The broker automatically exits a position once it goes down the sell-stop level
Stop-Loss Order
Your stop-loss order informs your broker how much risk you’re willing to take for a certain position. Basically, it represents your risk tolerance.
This automated order execution lets you be away from your trading device without suffering rapid losses from a market reversal.
- Sell Stop-Loss Order: If you’re in a buying (long) position
- Buy Stop-Loss Order: If you’re in a selling (short) position.
Say you open a trade in EUR/USD at 1.0928 with a standard lot size, but you can’t afford to lose much per unit. What you can do is set your stop-loss at 1.0925.
This way, you limit your loss to only three (3) pips per unit.
Trailing Stop Order
Trailing stop order lets your broker know that you want to ride the upward trend of the market.
Unlike a stop-loss order, where you set a fixed stop-loss price, you set a percentage in the trailing stop order. This percentage must be below the entry market price.
Essentially, your stop order trails together with the market during an upward trend. This way, you won't miss out on bigger gains when the security value increases.
In case of a market reversal, your trailing stop level will stay at its highest and most recent peak. This way, you safeguard your profit when the market starts to move against your position.
So, you’re now familiar with the common forex orders that could help you in your trading. But what about the uncommon ones?
In the next lesson, you'll learn about the different forex orders you can use in the forex market.
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