The term “order” refers to the way you enter or exit a trade. In this article we will discuss the different types of Forex orders that can be placed on the market.
Make sure you know the types of orders authorized by your broker. Some brokers sometimes practice different types of orders.
There are some types of so-called “basic” orders offered by all brokers and others that seem stranger.
- 1 Types of Forex Orders
- 2 Unusual orders on Forex
- 3 In conclusion…
Types of Forex Orders
A market order represents the action of buying or selling at the best available price.
For example, the offer price for EUR/USD is 1.2140 and the demand is 1.2142. If you wanted to buy the EUR/USD is market price, it would be sold to you at the demand price of 1.2142. You would click on “buy” and your trading platform would instantly execute a purchase order at that price.
If you shop at Amazon.com, it’s like using their order in 1 click. The proposed price satisfies you, you click and it’s up to you! The only difference is that you buy or sell one currency for another instead of buying a Justin Bieber CD.
“Limit” entry order
A “limit” entry is an order placed either for purchase below the market or for sale above the market at a specified price.
For example, suppose that the EUR/USD is trading at 1.2050. You want to sell if the price reaches 1.2070. You have the choice between waiting in front of your screen for the prices to reach the 1.2070 level (level on which you will have to click and sell on a market order) and setting a “limit” sell order on this 1.2070 level (so that you can leave your seat for a while to go to the ball in your study class).
If the price reaches or exceeds 1,2070, your trading platform will automatically execute the sell order at the best available price.
You use this type of entry when you think that the prices will reverse once your order price has been reached!
Stop input order
A “Stop” entry order is placed for a purchase above the market or for a sale below the market at a specified price.
Suppose that the GBP/USD trades at 1.5050 and continues to rise. You are convinced that the price will continue in its direction if it reaches the 1.5060 level. You can then proceed as follows: stay in front of your screen and wait for the prices to reach the 1.5060 level to place a purchase order OR set a “stop” entry order at 1.5060. You use “stop” entry orders when you think that prices will continue in their initial direction.
Stop loss order
A “stop loss” order is a type of order related to the transaction in order to prevent or limit losses if the market turns against you. REMEMBER THIS TYPE OF ORDER; it remains effective until the position is liquidated or the stop loss is cancelled.
For example, if you bought the EUR/USD at 1.2230, you would place a stop loss order at the 1.2200 level. This means that if you were wrong and the EUR/USD started a drastic drop instead of rising, your trading platform would automatically trigger a sale at 1.2200 and close the position for you by recording a loss of 30 Pips.
Stop losses are very useful if you don’t want to stay stuck in front of your instructor all day for fear of losing your money. You have the possibility to set up a stop-loss order on any position, which will allow you to carry out other activities in the meantime.
A trailing stop is a type of stop loss related to the transaction and moving simultaneously in the same direction, according to price fluctuations.
Suppose you have decided to sell the USD/JPY at 90.80, with a 20 Pips follower stop. This means that your stop loss would be at 91.00. If prices fall to 90.60, your stop loss would move to the 90.80 level (this is called “breakeven”).
Keep in mind that your stop will REMAIN at this new price level. It will not expand if the market turns even more against you. To come back to our example, with a 20 Pips trailing stop, if the USD/JPY reached 90.40, your stop would move to 90.60 (or lock in a 20 Pips profit).
Your position will remain open as long as the price does not exceed the 20 Pips limit. Once the prices have received the price of your following stop, a market order is automatically triggered and closes your position at the best available price.
Unusual orders on Forex
“Can I order a large hot soy milk with spices, sugar-free chocolate chips, a pinch of cinnamon, all served in a “Venti” cup, topped with whipped cream and caramel with a chocolate sauce on top?”
Good Till Cancelled (GTC)
A GTC order remains effective on the market until you decide to cancel it. Your broker will not cancel it at any time. Therefore, it is your responsibility to remember that you have programmed this order.
Good for the Day (GFD)
A GFD order remains effective on the market until the end of the day. As Forex trading is a 24-hour market, this usually means 5:00 p. m. EST since this is when the US market closes, but we recommend that you check with your broker.
One cancels the other (One-Cancels-the-Other – OCO)
An OCO order includes two input orders and/or stop losses. Both orders consist of variable prices and order durations and are placed above and below the current price. When one of the two orders is executed, the other is immediately cancelled.
Let us suppose that the price of the EUR/USD is 1.2040. You want both to buy at 1.2095 above the resistance level by anticipating a break and initiate a selling trade if prices fall below 1.1985. It should be understood that if the level of 1.2095 is reached, your purchase order will be triggered and the sale order of the level of 1.1985 will be automatically cancelled.
One triggers the other (One-Triggers-the-Other – OTO)
An OTO represents the opposite of the OCO, since it only places orders when the main order is triggered. You set up an OTO order when you want to take winnings and place stop losses in advance, even before you enter the trade.
For example, suppose that the USD/CHF is trading at 1.2000. You think that once the 1.2100 level is reached, the prices will reverse and start to fall again but only up to the 1.1900 level. The problem is that you have to take a whole week off to join your basketball team for a competition at the top of the mountain. Fuji where there is no Internet.
In order to seize the opportunity even remotely, you set a “limit” order to sell at 1.2000 and simultaneously a “limit” order to buy at 1.1900, then, for security reasons, a stop loss at 1.2100. As this is an OTO order, the “limit” buy order as well as the stop loss will only be placed if your initial sell order at 1.2000 is triggered.
The basic types of orders on Forex (market, entry limit, entry stop, stop loss and following stops) are generally those that a trader needs most.
Unless you are a very experienced trader (don’t worry, with a little practice you will become one), don’t be too fanciful in designing a complicated system of orders stacked on top of each other.
First of all, be satisfied with these basics.
Make sure you fully understand and accept the order placement system before executing any transaction.
In addition, also clarify with your broker the information relating to specific orders to verify whether roll over transaction fees are applied if a position is held for more than one day. Maintaining a simple methodology in terms of order placement remains the best strategy.
DO NOT TRADE on a real account until you are familiar with the handling of the trading platform you are using and its order placement system. There are more trading errors than you think!