What You Need to Know About Forex Order Types

Monday, October 14, 2019 Print Email

When Forex trading is concerned, orders remain one of the most powerful tools investors can make use of when entering a trade, when they are looking to reduce the downside risks or to safeguard their profit. For that reason, it is of vital importance to make sure that investors have a firm understanding of the mechanism of the different types of orders so that they could ascertain which order types will help them on their way to the trade goals they have set. It goes without saying that if traders do not place their orders properly, this can have a serious impact on their entry in a trade as well as on their exit points. Something traders should take into account is that the available order types might vary from one broker to another.

Market Orders

When speaking about the most common Forex order types, market orders almost invariably rank first. It is an instant-execution order, and what is specific about such orders is that investors resort to them when they would like to carry out an order against the price that is offered at that point. This order type can be used both when traders wish to enter a position that already exists or to exit a position.

Limit Orders

One of the distinctive traits of the limit orders is that they will be active, provided that a specific condition is met or in other words, when a trader is looking to enter a new position or exit an existing one once a specific rate or higher is attained. What is important to note is that there are two types of limit orders, more specifically, sell and buy limit orders. When limit sell orders are concerned, they are filled at a specific price or higher, while limit buy orders are filled at a specific price or lower. In most cases, such orders are utilized in order to fade breakouts or when traders are looking to set their objectives in terms of profit.

Stop Orders

Stop orders bear certain resemblance with limit orders, and they turn into market orders as soon as a specific requirement is fulfilled. This happens right after a predefined rate is attained. Stop orders are at hand when entering or exiting an existing position. Furthermore, we can distinguish between buy stop orders that become market orders once the specified rate is reached, and will be filled at the next best possible price. Sell stop orders are filled when the market price is the same as the price the trader has specified or lower. This order type is used when traders are looking to protect their profit and limit their losses. What investors should be mindful of is that stop orders are filled at the most advantageous rate that is offered after the market order is triggered. If you want to read up on the topic, you can find more on www.tradingpedia.com

Contingent Orders

Contingent orders are yet another order type Forex traders can make use of. Their main distinguishing characteristic is that they incorporate several order types. Furthermore, investors resort to them when they are looking to execute against a trading strategy. With this order type, one order should be triggered first so that the rest of the orders could be set going.

If/Then Orders

If/then orders are made up of two separate orders, the first of which is known as “if” order, while the second one is a “then” order. The then order will only be set off, provided that the if order is activated. If this happens, however, the second order will develop into a single and unassociated order. When then orders are concerned, they are not influenced by any position updates. Additionally, then orders are not attached to a trade. Another thing that is worth mentioning about then orders is that in the event that the if order is not executed, the then order will not be set off even when the market has reached the predetermined rate. Yet, no matter which part of the order will be called off, all parts the deal consists of will be canceled as well.

Expiration of Orders

Something investors need to know about the different order types is that they are activated when the next available price is presented. Yet, there are two Forex order types when it comes to their expiration, more specifically, end-of-day orders and good-till-canceled. In the first case, such orders will remain running until the end of the trading day, or 5 pm. When it comes to the second type of orders, however, they will continue to be open until they are canceled or filled. Yet, in most cases, such orders will expire automatically if a specific period of time has elapsed, and they are not wrapped up.

How to Place a Forex Order

Investors are likely to find placing orders exceptionally straightforward, even if they are total novices in the field. To get started, they are required to open the deal ticket and navigate to the order tab. Once this is done, traders will be prompted to make up their minds about the direction of the deal or whether they prefer to buy or sell. As soon as the price level is determined, and the respective limits or stops are set out, traders simply need to check out what types of orders exist and submit the preferred one. 

Before they dive into Forex trading, investors are advised to acquaint themselves with the peculiarities of the platform they plan on utilizing.

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