Placing Order in Forex Trading

Placing the correct order is probably one of the most significant parts of forex trading after deciding upon the right strategy. It is important to understand and put the right orders when we trade.

Limit order
Limit order is used to enter and exit the trades. It refers to the price the forex trader is ready to pay or accept. A buy limit order will be put when the order is placed the below the prevailing market price to state the highest most price the trader is ready to pay. Likewise, the sell limit order placed above the market price and it indicated the lowest price the seller is ready to accept.

When the forex trader already has a long position in the market, he can use the limit order to notify the broker the price at which he wants to sell once the targeted price has been reached. Limit order is also used to tell the broker the price at which the trader wants to make an entry in the market. If XYZ Company is trading at 44.50 and the forex trader wants to buy that at 42.00 then he can put the buy limit order at that rate.

Market Order
Market order informs the broker whether to buy or sell at the prevailing market price. This is most preferred in fast markets movements or while the forex trader wants to guarantee a position and wants to defend against losing a chance. Here the broker tries to buy or sell at the prevailing market price.


Stop loss order
Stop loss is of course the one of the most popular and important orders used. Stop loss order can make the forex trader make a new position, restrict the loss on an open position, to defend a profit. Stop order identifies a rate where an order the trader wants the trade to be executed. Buy stop order will be place over the prevailing market price whereas a sell stop, will obviously, be places under the current market prices.
When the stop order is reached, the order is executed. With a long position, the sell stop order is placed under the market rates to restrict the loss. As the market moves further up the order can be extended to defend the profit. This is referred to as the “trailing stop” order.
The sell stop order can also be used t make an entry into the market with the decline in the market. The buy stop order can be placed over the market rate to start a new position or even to end the current short position. Because the stop order turns out to be the market order, the real fill-in price may exist ahead of the stop price. And, more so in a hasty market.

The next post sees more about some other orders.