Types of Orders in Forex Trading


Types of Orders in Forex Trading

If you are relatively new to the world of Forex, you may be familiar with how to open a sell or buy deal with your preferred broker, but you may not know that there are many ways to enter into these deals, called order types.

Market order
A market order is the most common type of entry order where it is used to enter the trade at the best available price. In other words, if the EUR / USD is trading at 1.3280 and you place the order, you will buy the required currency at 1.3280.

The previous scenario refers to the ideal position to execute market orders, but caution should be exercised when using these types of orders in tight liquidity markets. For example, you may place a previous market order to buy a EURUSD, but if the market is volatile, a price gap is likely to occur at the next moment and therefore the best available price becomes higher than you expected.

Types of Orders in Forex Trading
Types of Orders in Forex Trading

Limit order
A limit order is an entry order that is used when you want to buy from the bottom or sell from the highest current market price.

For example, if the EURUSD is trading at 1.3280 and you want to buy it at 1.3270, then you can place a limit order below the current market price. In general, a limit order is used when we want to enter the market at a better price.

Stop order
The stop order is used to enter the market at a price higher or lower than the current price without having to sit in front of the computer screen in anticipation of the market reaching the target.

For example, if you want to buy EURUSD when it breaks above the 1.3290 level, the pair is currently trading at 1.3280. In this case you can place a stop order to enter the market when it touches the 1.3291 level.

We've been more detailed about pending orders (limit and pause) in a previous article if you'd like to know more about them.

Stop Loss Order
The Stop Loss Order is used to close positions and is the best way to protect your capital. A stop order is also a safe way to avoid losing more than you are willing to lose if the market moves against you.

For example, if you buy EURUSD at 1.3280, then you can place a stop loss at 1.3260, which means you have set the loss limit to no more than 20 pips.

There is a possibility of losing more than planned, in the case of a price gap that causes the market to exceed the specified stop level, in which case the stop loss order is executed at the second best price available. This scenario is likely to happen but in rare cases.

Stop the move
A stop order is one of the most useful pending orders as it tracks the market as it moves in your direction and thus avoids monitoring the platform screen all the time. You can enter a stop at a specified level that is a certain distance from the market price, in which case the stop will move up or down as the transaction moves in favor of you, ensuring a certain portion of the profit.

For example, if you buy the Euro at $ 1.3280 and put the stop order at 10 pips. If we assume that the pair has risen to 1.3300, in this case the stop will move 20 pips to 1.3290 and thus you have booked 10 points of profit you will never lose.

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