In forex, different trade orders are used to initiate trade positions. The thinking behind the use of different order types in forex is to enable the trader to take advantage of various market situations in order to get the best possible market deals. The names allocated to each trade order type as well as the procedure for placing such orders different from one trading what is sell limit in forex trading type to another. For instance, the name of a particular forex order on the MT4 will not be the same as the same order when used on the ActFX turnkey platform.
Order Types in Forex Broadly speaking, two types of orders exist in forex. Each type can be further subdivided into buy or sell for market orders, and limit or stop orders for pending orders. Limit and stop orders also have buy and sell subdivisions. A market execution order is an instruction from the trader to the broker to execute a buy or sell order for a currency at the prevailing market price. A market order is therefore an instant order, as the trader is interested in having the order fulfilled instantly and not at a later time or date.
What forex orders constitute market execution orders? The snapshot above shows the various orders that constitute the market execution orders. MT4 platform is an instruction by the trader to the broker to buy a currency pair at the prevailing market price. It is used when the trader has an expectation that prices will start to rise immediately.
It is used when the trader has an expectation that prices will start to fall immediately. The market execution orders are used when the trader wants to get in on the action as delayed trade entry will lead to a shortfall in the profit the trader expects from the trade. Some reading the article may be surprised as to why the stop loss, take profit and trailing stop have been added as market execution orders. These in themselves are also trade orders. The Stop Loss order is an instruction from the trader to the broker to automatically end an active trade at a certain unfavourable price that has imparted a negative value to the position in order to avoid further losses. The broker does not just close the order. Therefore, the TP requires that the broker matches the order to exit the trade at a particular favourable price to another trading party prepared to acquire the position at that price.
The Trailing Stop is simply an order to the broker to adjust the stop loss for a trade to follow advancing favourable prices by a particular number of pips, and to close the position when the price has retreated against the trader’s position by a certain number of pips. A pending order is therefore a delayed order. They are used when conditions in the market do not favour an immediate entry. Pending orders can be limit orders or stop orders.
Limit orders are used when the trader feels that prices will be unfavourable to his expected trade direction before they become favourable. A Buy Limit is used when the trader feels that the price of the asset will fall initially before they start to rise again. Obviously if prices will fall before they rise, a market buy order cannot be used as this will cause immediate negative value to the position. There is no way of knowing before initiating a trade how negative a position can become before recovery. F9, right-clicking on the chart or clicking the New Order tab. Enter the price at which you want the trade to be executed.
This should be at a level lower than the market price. Obviously if prices will rise before they fall, a market sell order will cause the position to have an immediate negative value. To avoid this, a Sell Limit is used. This should be at a level higher than the market price. Stop orders are used to trade continuation of price action in a particular trend. A Buy Stop is a trade order which sets the entry price of the trade at a level that is higher than the market price.