Types of Forex Orders

An order is neither more nor less than what is done when entering or exiting the market. They are the orders given to our broker to carry out an action on our behalf: buy or sell. Depending on the market there may be some small differences but the basic orders are the same in all. In forex, we can find numerous types of orders although not all of them are available in any broker. To start with, stick with the basic orders until you have more experience and make sure of the type of orders that your broker accepts.

Basic Orders: market, stop and limit

These orders are universally accepted by any broker, they are the basic orders that every trader will need.

  • Market order : (market order) It is a buy or sell order at the current market price. You see the price, you like to buy, and you execute the market order. Instantly the order is sent to the broker and executed. For example, EUR / USD is at 1.5815, your analysis tells you that it will rise and you like this price as a long entry price (buy) you click Buy and the order is sent to the broker and it is executed.
  • Stop Order: Stop orders are market entry orders above or below the current price in the direction of the price movement. That is: if the current price is 1.5815 in EUR / USD and you want a sell to be executed if it drops to 1.5780 you must place a stop sell order at 1.5780. If the price reaches 1.5780 or less the order is executed, if the price does not reach 1.5780 the order will not be executed and you can cancel it whenever you want (even in some brokers you can set the time for which the order is valid, after this time if the order has not been executed is canceled automatically). Please note: If the price reaches the entry price of a stop order, the order becomes a market order and it is executed at the best available price below the order price (if it is sell stop) or at the best price above the order (if it is buy stop).

To better understand the stop order, stick with: A buy stop order will be a pending buy order with entry higher than the current price. A sell stop order is a pending sell order with entry below the current price.

One type of stop order is the stop loss: it is a sell / buy order associated with an open trade used to protect the trade in case the market goes against it. Example: We open a buy in EUR / USD at 1.5780 and place a Stop Loss exit order at 1.5750. The Stop Loss will carry out the exit sell order associated with our buy operation if the market goes against and reaches 1.5750 or less, we would lose 30 points but the idea is to protect ourselves from greater losses if the market continues in the opposite direction to our operation .

  • Limit order: Buy limit and sell limit orders specify entry orders at prices higher or lower than the current market price with the following nuance: A buy limit order is a buy order at a price lower than the current price and a sell limit order it is a sell order at an entry price higher than the current price.

For example: Current price in EUR / USD is 1.5780 and you want to enter a sale if it rises to 1.5800 you must place a limit sell order at 1.5800.

In the case of limit orders, the order does not become a market order if the price reaches the entry price with the advantage that it is only executed at the indicated price or at a better price. In other words, a buy limit order only executes at the specified price or lower (it will be better for the trade) and a sell limit order only executes at the specified price or higher (better).

Another difference with stop orders is that stop orders, when transformed into market orders, are always executed if the price reaches or exceeds our entry point and can be executed at prices worse than indicated, while limit orders may not be executed if the price quickly passes through our entry point or skips our entry price as can happen in times of high volatility. That is, with a limit order we establish the limit price of our operation (in other words, we establish the maximum price that we are willing to pay in a sell operation or the minimum price that we are willing to pay in a buy operation).

Remember: A limit order guarantees that if the entry is executed it will be made at the indicated price or better. A stop order does not guarantee the strike price but it is certainly useful if you cannot monitor the position.

Some clarifications:

Can I place a buy stop order at a lower price than the current one? In general yes, although it depends on the broker. In any case, if you do, you will achieve a devastating effect on your operation since the order will be executed at the same time as a market order at the price at which the market is.

Can I place a buy limit order at a price higher than the current market price? Yes, although it also depends on the broker. Although in principle it is a good idea to guarantee the entry price, you run the risk that it will not be executed.

Temporary valid options or actions associated with any order

By default, any type of forex order is usually GTC (Good Till Cancel), that is, it is valid until the trader cancels it. But there are other options associated with the time an order is active.

  • GTC (Good Till Cancel) : They are valid orders until you cancel them. The broker will not cancel them at any time.
  • GFD (Good for day): These are orders valid only until the end of the day the order is sent. You should check with your broker what time is the end of the day for them, remember that Forex is a continuous market 24 hours a day.
  • OCO (One Cancel Other) : A group of orders can be associated with each other so that the execution of one cancels the others. For example you can place two stop orders to sell below the current price and buy above so that when one of them is executed the other is canceled.

In principle with these orders, you will have plenty. There are brokers that offer other types of additional orders. As a tip, I tell you to open a demo account with the broker of your choice and practice with their order system and with the execution of them until you feel comfortable before opening a real account with it.

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