Forex Trading Order Types

Today, I am going to consider Forex trading order types.

You must know the types of orders you can use in the market to make conscious and effective transactions in Forex Markets.

The term “order” expresses to how you will enter or exit a trade.

Here I will discuss different forex trading orders that you may encounter in the forex market.

Firstly, you should be sure that which types of orders your broker accepts. When your broker receives your order, it will open the position according to the information given in the order.

Now that you know what an order is, let’s consider the main order types and some less-known order types.

The five main order types are:

  • Market orders
  • Limit orders
  • Stop orders
  • Take profit order
  • Stop loss order.

Market Orders

Market orders are the most common type of orders in the forex market.

The buying or selling order given at the instant market price is called the Market Order. The market order is a kind of order which executes instantly.

Buy-Sell Market Order

For example, the bid price for EUR/USD is currently 1.1368 and the asking price is at 1.1370. It means with a buy order, you would buy euros at the asking price of $1.1370. When you click to buy, your trading platform will instantly execute a buy order at that exact price.

And, with a sell market order, you would sell euros at the bid price of $1.1368. The sell order executes instantly just like the buy order.

Limit Orders

A rational investor who wants to trade in the Forex market always wants to buy at the lowest price in buying transactions and to enter the position at the highest price in sales transactions.

Limit orders are orders that automatically open positions when the market price reaches the optimum level determined by the investor.

There are two types of limit orders. These are sell limit order and buy limitSell Limit Order

Sell Limit Order

With the expectation that the market price will rise to a level higher than the current level, the investor may issue a sell limit order to the specified price level and perform automatic transactions when the price reaches the desired level.

These orders are called “Sell Limit’’ orders. Sell limit orders are issued for sales-only positions.

For example, EUR/USD is currently trading at 1.1350. You think that it will be rise further to 1.1400 but then fall in price, you can use a sell limit order placed at 1.1400 in this situation.

When the price reaches 1.1400, the sell limit order becomes a customary sell market order and fulfills its short position.

Limit orders

The biggest advantage of limit orders over market orders is that you don’t have to wait for the price movement to take place on a market order. You can set a sell limit and walk away from your computer to watch your favorite TV show.

Buy Limit Order

You can also set a buy limit order as you would set a sell limit order. But you are wondering how?

With the expectation that the market price will reach a level lower than the current level, the investor may issue a buy limit order to the price level and the price can be processed automatically when the price reaches the desired level.

These orders are called ’’Buy Limit’’ orders. Buy limit orders are issued only for purchase positions.

Investors give this order by considering that the price will fall to the desired level and the price will rise again after the order is realized.

Stop Orders

Stop orders become market orders when certain conditions are fulfilled just like limit orders. You can use stop orders to buy above the market, or sell below the market.

There are two types of stop orders. These are buy stop order and sell stop order.

Buy Stop Order

It is an order type that enters the purchase process at a price level above the market price.

While buying at a high price does not seem logical, the investor uses the Buy Stop order because the price is expected to rise more quickly when the price exceeds the level determined technically.

For example, EUR/USD is trading currently at 1.1350 and it is rising. You think that the price will go on in the rising direction if it hits 1.1400.

Instead of sitting in front of your PC and waiting to reach 1.1400 and buying it in the market, it’s better to set a buy stop order at 1.1400.

You use the buy stop order when you feel that price will move in up direction.

stop orders

Sell Stop Order

It is an order type that enters into sales transaction at a price level below the market price.

Although it doesn’t seem reasonable to sell at a low price, the investor uses the Sell Stop order when there is an expectation that the price will drop rapidly when the price breaks the value which investor predicts.

You use the sell stop order when you feel that the price move in down direction.

Take Profit Order

A take profit order closes your position automatically when the target price is reached in buying transactions.

In selling transactions, the take profit order allows to close the position automatically when the price reaches a specified level below the current price.

The TP order is a forward order closing operation and the function of this order type closes the position profitably. The TP order is entered with an estimate that the market price will not increase further.

It is the orders that allow the investor to close his / her transaction at the point where it reaches the target profit.

Stop Loss Order

The stop-loss order is similar to take profit order, with the difference that they are used to limit your loss.

In buying transactions, the take profit order allows closing the position automatically when the price reaches a specified level below the current price.

A take profit order closes your position automatically when the target price is reached in selling transactions.

In case of possible loss, when the price reaches the specified level, the process is automatically closed and no further loss is prevented. Such orders are called gel Stop Loss orders.

The Stop Loss order is a type of order that allows the investor to determine the level of loss that may be incurred and prevent further loss. Stop Loss orders can be applied for both buying and selling orders.

Less-Known Order Types

Good ‘Til Canceled Orders

A good ‘til canceled (GTC) order is similar to a limit order. As the name suggests, a GTC order remains active until it is either executed, canceled by the trader, or closed.

Good For the Day Orders

A good for the day order, also called day order, automatically expire by the end of the day if the conditions of the underlying limit or stop order are not met. In this regard, it’s a GTC order with an expiration by the end of the day.

One-Cancels-the-Other Orders

Also called an OCO order, a one-cancels-the-other order is a combination of a limit and stop order previously discussed. The main point here is that once either the limit order target, or the stop order target is reached, the remaining order is canceled leaving only one open position.

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