Now that you know a few things about Forex, this might be the time to take your training to the next level, by understanding even far complex things, as we proceed, the complexity of the lessons would increase, and so would the quizzes, it is okay to retake a quiz or to retake a lesson to pass a quiz.
The truth is, you are better off knowing your stuffs anyway, right? Now let’s proceed!
Types of Order
In Forex trading, there are basically two forms of order’s, the market order and the pending order.
Market orders are instantly executed once you place the trade, with the liquidity in the Forex market, market order’s often take a fraction of a second to get executed.
Pending orders are order’s that are placed now but set to execute at a future price date.
There are 4 types of Pending orders in Forex.
- Buy Limit
- Sell Limit
- Buy Stop
- Sell Stop
Buy Limit order’s are placed below the current price point, which means the trader expects the market to drop in price, however, he wants to be a participant of the potential upward movement, he therefore sets a price to buy low to get a better entry point.
Buy stops are placed above the current currency pair price. Assuming the current price of EUR USD is 1.20790, a trader can place a trade to buy at 1.20890 in the hopes that once the price reaches that level, it would continue the upward momentum.
Sell Limit order’s are placed above the current price point, which means the trader expects the market to increase in price, however, he wants to be a participant of the potential downward movement, he therefore sets a price to sell high to get a better entry point.
Sell stops are placed below the current currency pair price. Assuming the current price of EUR USD is 1.20790, a trader can place a trade to sell at 1.20690 in the hopes that once the price drops to that level, it would continue the downward momentum.
Sometimes a trade may go against you, causing you to lose money, a stop loss when inserted would cause your trade to trigger at a particular price point without you having to manually close it.
It is important to note, that not all stop loss orders actually make you lose money. This is because a stop loss can be moved above the entry price to secure some profits.
Take profits is opposite to Stop Loss, it is designed primarily, as the name suggests to make you take profits from the market automatically.
When set, the trade would close automatically, securing your profits without having to manually close the trades yourself manually.