Types of the Forex orders
Order is a command coming to a broker from his client to perform a buy/sell operation for a specified price and at an exact time. Orders are a trader's integral tool, which allows to monitor trading and reduce the operational risks.
The market and the pending orders
All orders in the foreign exchange market are divided into two main categories – the market and the pending. A market order is a requirement to close a deal at the current price. Its execution happens when you open a buy/sell position for any asset. This way of making transactions is not always convenient, especially during high volatility of the market. It is dangerous since price can return back to the disadvantageous side before the order is executed.
The advantages of pending orders
The pending orders allow to buy or sell an asset in the future for the best price. Such orders are triggered automatically, when the price reaches a given level.
The main advantage of these tools is that a trader doesn’t need to monitor the market not to miss the moment for a transaction. Orders are opened immediately, when certain conditions are met. It happens regardless of absence or the presence of the Internet and electricity.
The pending orders can remain active for a long time, until they are executed or canceled by a trader. A broker can remove a pending order only if there is no necessity in a margin security on the trader's account.
Types of the pending orders in Forex
In the terminal MT4, there is an opportunity to use 4 types of pending orders:
1. The Limit Order is represented by two types of orders – the buy limit and the sell limit.
- The buy limit order involves buying an asset at a price lower than its current value. A trader puts a buy limit expecting, that the price will fall to a certain value, after which it will begin to grow.
- The sell limit is set, when the trader calculates an increase in the price to a certain value, after which it begins to fall. In this case, the order is triggered, when the price becomes higher, than the current one.
2. The Stop Order can be a buy stop and a sell stop.
- The buy stop order is used to close the transactions at a price higher, than the current one. It is used, when the market has a strong trend, which is difficult to break. If the level really stands, and the price reverses, the buy stop will help you to avoid losses and will close the deal by the best possible price in this situation.
- The Sell stop closes the deal at a price lower, than the current one. It is used, if the trader doubts, whether it is worth opening an order, because there is the high probability, that the price will go to the other side, unprofitable for him. If this happens, the sell stop will not let the deal open.
3. The Stop-loss is designed to limit the wastes of a loss-making transaction. By this order, traders regulate their trading risks. If the price goes in a disadvantageous direction for the trader, the stop-loss will close the deal, when the set value is reached. In Metatrader, it is possible to set a floating stop-loss, the so-called trailing stop. By using it, you can set an order on a certain distance from the current price. If the market goes in the right direction, the trailing stop will reach the price, increasing the trader's profit. If the price reverses, the order will be fixed to secure the position from losses.
4. The take-profit is used to fix profits. This order is set at a predetermined level and closed with a profit, when the price reaches this mark.
Traders, who want to minimize their trading risks maximally, use the pending orders. This simplifies greatly the trading process and allows to close transactions at the best price.