There are various types of forex orders you must be familiar with and be able to apply in your forex trading before diving into the forex trading world. The term order in forex refers to the instructions you will provide your broker to enter or exit a trade on your behalf. Now that you can no longer place market forex orders in the currency market by calling your broker on the phone, you must do everything. You're right; welcome to the 21st century.
Forex orders come in a wide variety, and traders use them to organize and carry out their deals. There are some fundamental order types that all brokers accept, even though these may vary between various brokers.
Market orders are orders that are quickly filled at the price that your broker is offering at the time. Orders to buy and stop are two examples.
A Forex order that will be executed later at the price you specify is a pending order. These comprise buy limit, sell limit, buy stop, and sell stop orders.
The most straightforward order to receive immediate market execution is a market order, which is an order to buy or sell at the current price. Let's use the currency pair EUR/USD as an example. The current bid and ask prices are 1.1920 and 1.1922, respectively. If you wanted to purchase EUR/USD at market value, it would be provided at the cost of 1.1192.
Technically, when you click purchase on your forex trading platform, a buy Forex order is immediately executed at that (hopefully exact) price. It is crucial to keep in mind that there can be a variation between the price you choose and the final price that is implemented on your forex trading platform, depending on the circumstances surrounding the foreign exchange market. Slippage is the name for this.
A limit order is a request to purchase or sell at a specific limit price should the market move to your targeted level. Consider a limit price to be a price assurance. Setting a limit order ensures that your order will only be fulfilled at the limit price (or better).
You can submit a "Buy Limit" order at or below a specific price.
You can place a "Sell Limit" order to sell at the given price or higher.
The order is activated and executed at the limit price once the market reaches the limit price (or better). Limit orders are in your favor and can only be carried out when the cost is your turn.
Let's imagine, for illustration, that the EUR/USD is currently forex trading at 1.1950. But if the market declines and the price approaches 1.1900, you want to buy the EUR against the USD.
A purchase limit order would be placed here at 1.1900.
Your order will automatically be activated if the market price lowers to 1.1900 and touches or dips below your specified "Buy Limit Order" price. Essentially, you are attempting to purchase the asset at a lower cost because you consider 1.1900 a critical support level.
Important: A limit order to BUY will be carried out at a price equal to or less than the stated stop price if it is placed below the going market rate.
An order is "stopped" from being executed by a stop entry order until the price reaches a stop price. When you wish to buy only when the price rises to the stop price or sell only when the price falls to the stop price, you use this form of order in your forex trading strategy.
A market Forex order turns into a stop order when a trend begins, and you believe the new price to be the ideal limit entry order to join the movement. A stop order can only be executed when the price becomes less favorable.
This order type differs slightly from the ones mentioned before. This is because the above orders are entry-pending orders meant to get you into a trade. In contrast, a stop-loss order is a limit order that allows you to exit the business. It's an order to leave.
If the price moves against you, this limit order helps to stop further losses. Therefore, it is a sell-STOP order if you are long. Additionally, it is a purchase. STOP ordering if you are short.
The basic conclusion is that you must understand the various kinds of forex orders and include them in your forex trading strategy. As you can see, stop losses are helpful when trading forex, especially if you don't want to sit in front of your computer, gnawing your nails, scared that you will lose your money. When market news is announced, you'll eventually use stop-loss orders to lessen the risk of remaining open in the market and being exposed to unforeseen developments.
EnclaveFX Ltd believes you can apply additional "advanced" forex stop orders and limits in the following levels. These comprise, for instance, the take-profit order and the trailing stop order.
