fbpx
  • Do You Know the Types of Forex Orders?

    “Would you love some pips with that?”

    Alright, not that nature of the order.

    The word “Order” is a forex trading term that entails how someone will ENTER or EXIT a trade.

    Here we are going to show you the various types of forex orders that you can place into the forex market.

    Make sure you’re aware of the types of orders that your brokers will accept.

    The types of forex orders accepted by brokers vary according to the broker.

    However, there are standard types of orders that all brokers offer while there are also some others that appear weird.

    Types of Orders

    Market Order

    The term “market order” refers to an order initiated to buy or sell at the most beneficial price available.

    For instance, the current bid price for EUR/USD is put at 1.2140 while the price sum of 1.2142 represents the ask price. If you plan to purchase EUR/USD from the market, then you will get it at the ask price of 1.2142.

    Once you click to buy, your trading platform would immediately initiate a buy order at a particular price quoted.

    Have you gone shopping at Amazon.com before? You would notice that the process is like making use of their “1-Click ordering” platform. Once you like the price listed, you click once, and the product is yours!

    When compared to forex orders, the only real difference is that you are simply buying or selling one or more currencies against another or more currency, instead of purchasing a Don William CD.

    Limit Entry Order

    This is an order that is placed to buy below the market price or to sell above the market price.

    The current price is represented by the blue dot.

    For instance, EUR/USD is recently exchanging at the value of 1.2050. You will want to play short if the price gets to 1.2070.

    In that case, you will have to sit in front of your PC screen, waiting for it to reach 1.2070, at which you would initiate a sell market order. Or you can fix a sell limit order to be 1.2070, after which you can conveniently leave your computer and get on with other things.

    If the price accelerates to 1.2070, your trading platform will independently initiate a sell order at the best price available.

    This is the type of entry order you can use when you have faith that price will reverse upon reaching your specified price target.      

    Stop Entry Order

    Here is an order that is placed to buy above the market or selling below the market at a given price.

    The blue dot represents the current price.

    For example, the current trading price for GBP/USD is put at 1.5050, which is surging upward.  You have the faith that the price will continue moving in this direction if it reaches 1.5070.

    Below are some of the things you can do to make this belief come true:

    1.    Relax in front of your PC and once it hits 1.5070, execute a buy at market price, OR

    2.    Set up a stop entry order put at 1.5070.

    Stop entry orders are what you use when you believe that price will move in a particular direction.

    Stop Loss Order

    This is the type of order connected to a trade designed to prevent additional losses in case the price goes contrary to your expectations.

    If the position you are is a long one, then it is a sell STOP order.

    If the position you are is a short one, then it is a buy STOP order.

    DO NOT FORGET THIS TYPE OF ORDER.

    A stop loss order will maintain its effectiveness until you cancel it or the position is liquidated.

    Here is an example; assuming you decide to go long (buy) GBP/USD at 1.2230. To reduce maximum loss, you choose to set a stop loss order at 1.2200.

    What this means is that assuming you were wrong and GBP/USD falls to 1.2200 instead of heading upward, your trading platform will execute a sell order automatically at 1.2200, which is the best possible price available, and your position will be close out up to a 30-pip loss (ughhs!).

    Stop losses are most beneficial if your plan is not to sit in front of your PC all day, worrying that you will probably lose your entire money.

    You can quickly put up a stop loss order on any position that is open so you will not miss any leisure activity.   

    Trailing Stop

    Here is another type of stop-loss order connected to a trade that keeps moving as prices fluctuate.   

    Assuming you have taken the decision to short USD/CHF at 90.80, bearing a trailing stop of 20 pips.

    This means from the onset; your stop loss is put at 91.00. In the event the price went down and reached 90.60, you would see your trailing stop has moved down to 90.80 or a breakeven point.

    Bear in mind though, that all things being equal, your stop will remain at the latest price level. If the market goes up against you, your stop will not grow wide.  

    Now, let’s go back to the previous example where the trailing stop has 20 pips. If USD/CHF reaches 90.40, your stop would then goes up to 90.60 (or get lock in the profit of 20 pips).

    As long as price doesn’t move against you by 20 pips, your trade will remain open.

    Immediately the market price influences your trailing stop price, you will receive a market order to close your position at the most favourable price available, and your position will be closed.

    Weird or Abnormal Forex Orders

    “Can I order a Sombrero hat with a Rio Grande extra soft foam, tinted with nails, and rounded with Sapele wood, and wrap that in a mattress made of fleece and stitches of Ankara fibre, and fill up the interior layer of the hat with plumb stockings and goatskin on the edges?

    Uggghh! That’s a wrong and abnormal order.

    Good ‘Till Cancelled (GTC) Order

    GTC orders are those that continue to be active in the market dealings until you decide to cancel them. Know that your broker will not execute a cancellation of the order at any time. So, you are responsible for ensuring that you have the order scheduled.  

    Good for the Day Order (GFD)

    Order like a GFD continues to be active in the market until the trading day comes to an end.

    Since the foreign exchange market is the type that operates 24-hours, meaning 5:00 PM EST—the time U.S market closes up. However, we recommend that you check this up with your broker.

    One – Cancels – the-Other Order (OCO)

    OCO orders are those orders that combine two entries and stop loss orders.

    In this case, two orders having variable price and durations are placed above and below the outstanding/current price. Immediately one of the orders is initiated, the other one is cancelled.

    Assuming the price of EUR/USD is put at 1.2040, you would either like to purchase it at 1.2095 beyond the level of resistance, anticipating a breakout or simply execute a selling position in case the price reduces below 1.1985.

    The reason for this is that if you reach the total of 1.2095, it will trigger your buy order, which will in turn, cancel the 1.1985 sell order automatically.  

    One Triggers– the – Other Order (OTO)

    An OTO order is a direct opposite of OCO Order. It is the type of order that only put on orders immediately the parent order is triggered.  

    An OTO order is the type of order that you set when you plant to set stop loss levels and profit taking ahead of time, even before you involve in a trade.

    For example, USD/JPY is currently trading at 1.2000, and you have faith that once it reaches 1.2100, it will revert and head downward—only going up to 1.1900.   

    However, the major challenge is that you may be gone for a whole week because you probably will get involved in something else.  

    To make sure you didn’t miss out while away, you can set a sell limit, putting it at 1.2000 and simultaneously, set a related buy limit at 1.1900, and avoid any unforeseen event, set a stop-loss at1.2000.

    Being an OTO, you can only place both the stop-loss and the buy limit orders if the initial sell order that is put at 1.2000 is triggered.

    In conclusion,

    The standard forex order types (stop entry, market, stop-loss, and trailing stop) are everything that all traders ever need.

    Here is a hack sheet (the blue dot is the current price).

    Except you are a professional trader (which is possible for you with enough practice and time), don’t bother with designing a trading system that requires a huge volume of forex orders that are all the time sandwiched in the market.

    Try staying within the standard stuff first.

    Be sure you are fully aware and comfortable with the order entry system used by your broker before initiating a trade.

    You also have to check regularly with your broker to give you information on specific orders, and to see if there will be any applicable roll over fees in cases where a position is held much longer than usual, say a day.

    The best strategy is to keep your ordering rules simple.

    NEVER trade by using real money until you are comfortable with the trading platform that you’re currently making use of, including its order entry system. Watch out for erroneous trade and more.

  • arrow