Forex Leverage:A Comprehensive Explanation

Types of Forex Orders

Forex trading involves various types of orders that traders use to manage their trades. While these may vary between different brokers, several basic FX order types are generally accepted by all. Understanding these order types can help traders enter and exit the market appropriately, allowing for bespoke trading styles and providing equanimity for the trader. This article will discuss the main forex orders and how they can be utilized in live trades.

Market Orders

Market orders are the most basic and often the first FX order type traders come across. As the name implies, market orders are executed immediately at the current market price. This means if you want to enter the forex market immediately, you can place a market order and be entered at the prevailing price.

Typically, scalpers and day traders rely on market orders to enter and exit the market quickly, according to their strategy.

Example:

If the EUR/USD is trading at 1.1392, a market order to buy would execute immediately at this price. The same applies to a market order to sell.

Entry Orders

Entry orders are another common FX order type. These orders can be set away from the current market prices. If the market reaches the pre-selected price, the entry order is executed, creating a new position. One advantage of entry orders is that traders do not need to be in front of their computers to execute their trades.

Entry orders are often used for breakouts or other strategies that require execution when the price reaches a certain level.

Limit Orders

Limit orders in forex trading come in two forms:

Limit Orders to Open a Trade

These are used to enter the market at a better price. For example, if the EUR/USD is trading at 1.1294 and you expect it to drop to 1.1200 before rallying, you would place a limit order to buy at 1.1200. Conversely, if you expect it to rise to 1.1300 before falling, you would place a limit order to sell at 1.1300. The order will only be filled at the designated price or better.

Limit Orders to Close a Trade

These orders close a trade when the market moves in your favor. For instance, if you bought the EUR/USD at 1.1300 and want to exit with a 100-pip profit, you would place a sell limit order at 1.1400. Similarly, if you sold the EUR/USD at 1.1300 and want to exit with a 100-pip profit, you would place a buy limit order at 1.1200.

Stop Orders

Stop orders are also commonly used in forex trading and come in two variations:

Stop Orders to Open a Trade

These are used to enter the market at a predetermined price. For example, if you expect the EUR/USD to rally after breaking above 1.1500, you would place a buy stop order at 1.1501. Similarly, if you expect it to continue falling below 1.1200, you would place a sell stop order at 1.1199. Once the market reaches the specified price, the stop order becomes a market order and is executed at the next available price.

Stop Orders to Close a Trade

Protective stop orders close a trade when the market moves against your position by a specified amount. For example, if you bought the EUR/USD at 1.1500 and want to limit your risk to 50 pips, you would place a sell stop order at 1.1450. Conversely, if you sold the EUR/USD at 1.1400 and want to limit your risk to 50 pips, you would place a buy stop order at 1.1450.

How to Place a Forex Order

Placing a forex order is relatively straightforward, though the process can vary slightly between brokers. Here are the general steps:

1. Open a deal ticket and select the Ordertab.

2. Choose the direction of the trade (Buy or Sell).

3. Specify the price level, which will determine the type of order based on whether it is above or below the current market price.

4. Place stops or limits as needed.

5. Submit the order.

Familiarizing yourself with your trading platform can help minimize errors when executing or managing trades.

Further Reading to Advance Your Forex Trading

Live Trading Webinars:

 Cover various topics related to the forex market, such as central bank movements, currency news, and technical chart patterns.

Risk Management and Self-Discipline:

 Learn how much capital to risk on your open trades.

Traits of Successful Traders Guide:

 Discover the secrets of successful forex trader