Types of Forex Orders
There are some basic Forex Order Types that brokers provide and some others that sound weird.
Orders fall under two buckets:
Market order: an order instantly executed against a cost that the broker has provided.
Pending order: an order to be executed at a later time at the purchase price you specify.
Market Order
A market order is an order to buy or sell at the most effective available price.
For example, the bid price for EUR/USD happens to be at 1.2140 and the ask price is at 1.2142.
If you wanted to buy EUR/USD at market, then it would be sold to you at the price tag on 1.2142.
You'd click buy and your trading platform would instantly execute a purchase order at that (hopefully) exact price.
If you ever shop on Amazon.com, it's kinda like using their 1-Click ordering. You want the existing price, you click once and it's yours!
The sole difference is you're buying or selling one currency against another currency instead of shopping for a Justin Bieber CD.
Please bear in mind that depending on market conditions, there may be a difference between the purchase price you selected and the final price that's executed (or “filled”) on your trading platform.
Limit Order
A limit order is an order placed to either buy below industry or sell above industry at a specific price.
This is an order to buy or sell once industry reaches the “limit price:
You place a “Buy Limit” order to buy at or below a specified price.
You place a “Sell Limit” order to market at a specified price or better.
Once industry reaches the “limit price” the order is triggered and executed at the “limit price” (or better).
Notice how the green line is below the existing price. If you set a BUY limit order here, for it to be triggered, the purchase price would need to fall down here first.
As you can see, a limit order can only just be executed when the purchase price becomes more favorable to you.
Notice how the red line is above the existing price. If you set a SELL limit order here, for it to be triggered, the purchase price would need to rise up here first.
For example, EUR/USD happens to be trading at 1.2050. You want to go short if the purchase price reaches 1.2070.
You are able to either sit before your monitor and watch for it hitting 1.2070 (at which point you would click a sell market order).
Or you can set a sell limit order at 1.2070 (then you could disappear from your computer to go to your ballroom dancing class).
If the purchase price goes around 1.2070, your trading platform will automatically execute a sell order at the most effective available price.
You use this type of entry order once you believe the purchase price will reverse upon hitting the purchase price you specified!
A limit order to BUY at a high price below the existing selling price will undoubtedly be executed at a high price add up to or less compared to specified price.
A limit order to SELL at a high price above the existing selling price will undoubtedly be executed at a high price add up to or even more compared to specific price.
Stop Entry Order
A stop order “stops” an order from executing until price reaches an end price.
You'd use a stop order when you need to buy only after price rises to the stop price or sell only after the purchase price falls to the stop price.
A stop entry order is an order placed to buy above industry or sell below industry at a specific price.
Notice how the green line is above the existing price. If you set a BUY stop order here, for it to be triggered, the existing price would need to continue to rise.
Notice how the red line is below the existing price. If you set a SELL stop order here, for it to be triggered, the existing price would need to continue to fall.
As you can see, an end order can only just be executed when the purchase price becomes less favorable to you.
For example, GBP/USD happens to be trading at 1.5050 and is heading upward. You imagine that price will continue in this direction when it hits 1.5060.
Stop Loss Order
An order to close out if industry price reaches a specified price, which may represent a loss or profit.
A stop loss order is a type of order connected to a trade for the goal of preventing additional losses if the purchase price goes against you.
If you should be in a lengthy position, it is a sell STOP order.
If you should be in a quick position, it is a purchase STOP order.
REMEMBER THIS TYPE OF ORDER.
A stop loss order remains in effect until the position is liquidated or you cancel the stop loss order.
For example, you went long (buy) EUR/USD at 1.2230. To limit your maximum loss, you set an end loss order at 1.2200.
This implies if you had been dead wrong and EUR/USD drops to 1.2200 rather than moving up, your trading platform would automatically execute a sell order at 1.2200 the most effective available price and close out your position for a 30-pip loss (eww!).