Forex orders are mechanisms traders use to manage their daily trade, a good knowledge of FX orders is important, as they aid traders exit and enter the market appropriately.
There are different orders and they vary between brokers, however there are some orders which all brokers accept and adopt. Let’s Take a take a quick look at some of these orders.
The market order is normally the first order traders come across in the market. Basically, market order is an order to buy or sell at the best available price. In the market order, an action to buy is immediately executed at the prevailing market price.
For example, the bid price for EUR/USD is currently at 1.2140 and the ask price is at 1.2142. If you wanted to buy EUR/USD at market, then it would be sold to you at the price of 1.2142 You would click buy and your trading platform would instantly execute a buy order at that exact price.
Note: due to market factors and other related conditions, the selected price might be different from the final executed price. This is always not the case though.
Limit Entry Order:
A limit entry order is an order to buy or sell at a particular price or better. A limit order to BUY at a price below the current market price will be executed at a price equal to or less than the specified price.
A limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specific price.
Stop Entry Order:
A stop entry order is quite the opposite of the Limit Entry Order. A stop entry order is an order placed to buy above the market or sell below the market at a specific price.
Stop Loss Order:
A stop loss order is applied to prevent further losses if the market goes against your trading position. Stop Loss Orders are important in forex trading as they aid to minimize losses in any event of one.
If you are in a long position, it is a sell STOP order. If you are in a short position, then it is a buy STOP order.
Trailing Stop Order:
A trailing stop is a modification of the Stop Loss order. However, unlike the stop order, a trailing stop order is not subject to a specific amount, here the stop price is fixed with an attached trailing amount. That is if the market price rises in your favor, the stop price rises by the trail amount, but if the stock price falls against you, the stop loss price will not change rather it comes into effect to prevent a loss or further loss.
Good Till Cancelled (GTC):
A GTC order is only effective at the instance of the trader. It means that your position in the market remains good until you decide to cancel notwithstanding the market situation at the time.
Here, even your broker cannot cancel the order, he could only play advisory role.
Good for the Day (GFD):
A good for the day order is only active until the end of the particular trading day the order was made.
It is important that you confirm with your broker what time signifies the close of a trading the day in the active market, since the FOREX market is a 24- hour market.
This implies placing a combination of two entry and/or stop loss orders, the execution of one order in effect cancels out the other order immediately.
For example, if the price of EUR/USD is 1.2040. You want to either buy at 1.2095 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.1985. The understanding is that if 1.2095 is reached, your buy order will be triggered and the 1.1985 sell order will be automatically canceled.
This is an opposite of the OCO, here the execution of one order automatically initiates the execution of the other order.
This method is usually employed when a trader seems to be too busy to monitor his trading and the market fluctuations.
As a newbie, it is strongly advised to not do complicated, stick to the basics of trading and grow with experience. Importantly, always ask your broker questions for better clarification.