A Brief Introduction to Forex Orders

A Brief Introduction to Forex Orders

Submitted by adil on Mon, 04/15/2013 - 07:04

When a trade is executed it is termed as �order�. There are different types of orders offered by different brokers. Here is a brief overview of some important orders.

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Market Order:

Market orders are executed instantly at the best available prices.

Limit Entry Order:

The order will be a limit entry order when someone wants to buy the currency below the current market price or wants to sell above the current market price. Limit entry order can be divided into two categories; limit sell order and limit buy order.

Suppose EUR/USD is being traded at 1.3500 and you want to sell the market when the price reaches to 1.3505. In this way you are placing a limit sell order. On the other hand, if you desire to buy the currency when the price reached 1.3200 from 1.3500, you are placing limit buy order. Thus you have placed limit sell order above the current market price and you have placed limit buy order below the current market price.

Stop Entry Order:

For common understanding, you can consider this order opposite of limit entry order. In stop entry order you buy above the current market price or you sell below the current market price. This type of order is placed when someone is trading long and wants to enter on a breakout of resistance area.

Stop Loss Order:

As the name suggests, stop loss orders are placed to prevent the further losses than the limit you expect (i-e when the price moves beyond the limit you specify). Stop Loss orders are very important in Forex as they control the unwanted risks in your trades.

Trailing Stop Order:

Trailing stop order is similar to stop loss orders. To understand the difference let us consider an example. Suppose you have decided to short USD/JPY at 99.80 with a trailing stop of 20 pips. This indicates the original stop loss is 100.00. Now let�s assume the price goes down and hits at 99.50. The trailing stop would move down to 99.70. Now again assume that the price is moving up i-e 99.60, the trailing stop will still be 99.70. Your trade will remain open as long as the price does not move against you by 20 pips. Once the price moves 20 pips against you, the trailing stop order will be in place and your trade will close. It is very important to mention here that trailing stop does not prevent a trader from loss but automatically moves up when the market moves in the favor of the trader.