TYPES OS FOREX ORDERS

TYPES OS FOREX ORDERS

The term "order" refers to the way in which an operation in Forex will begin or end. In this article we will look at the different types of orders that can be placed in the Forex currency market.

Make sure you know the different types of Forex orders that your online broker accepts. This may vary depending on each broker.

Types of Basic Orders

There are some basic types of basic Forex trading that all online brokers offer:

• Market Order.

A market order is a purchase or sale order at the current market price.

For example, suppose that EUR / USD is at 1.2140. If you want to buy at this exact price, you would click on buy in the trading platform, which would instantly execute a purchase order at that price. That is basically a market order, buy a currency at the moment.

• Limit order.

A limit order is a placed order to buy or sell at a specific price. The order contains two variables; The price and the duration.

For example, suppose that EUR / USD is trading at 1.2050. You want to go long, ie open a buying position in this currency pair but only if the price reaches 1.2070. You can stay in front of the computer and see the price at any time until you reach 1.2070 to execute a market order or you can simply place a limit order at 1.2070. In the latter case, it will not be necessary to stay in front of the computer, since the trading platform will be responsible for executing your order at the time the price reaches 1.2070. You can specify what price you want to sell or buy and you can specify how long the order will remain active (GTC or GFD, which we will see a little later).

• Stop-Loss. A stop loss is a limit order, but associated with a currently open operation. Its purpose is to prevent further losses if the price moves against it. Or they also serve to protect a certain level of profits earned by an operation that is currently in profit.

Suppose, for example, that you bought EUR / USD at 1.2230. To limit possible losses, a stop loss is placed at 1.2200. This means that if the price goes up and reaches the price of 1,2200 instead of rising, the platform would automatically execute a sell order at the price of 1.2200, and the position would be closed for a controlled loss of 30 pips.

Stop-loss is extremely useful if you do not want to sit in front of the computer all day long (something highly recommended from a psychological point of view to avoid stress and operate with anxiety or being prey to emotions). You can simply place a stop loss in any open position to be protected in case of an eventuality.

Other Types of Orders

There are other types of Forex orders not so common, but they are available in most brokers.

• GTC (Good 'til canceled). A GTC order will remain active in the market until one decides to cancel it. The broker will not be able to cancel the order in any moment. It is the investor's responsibility to agree that such an order is available.
• GFD (Good for the day). An order of this type will remain active until the end of the current day. As the Forex market operates 24 hours, this usually means that at 9pm GTM (5pm EST), when the market in the United States closes, this type of orders will be canceled. However this can vary from one broker to another.
• OCO (Order cancels other). An order of this type is a mixture of two limit and stop loss orders. If one is executed, the other one will be automatically canceled. Example: The EUR / USD price is 1.2040. You want to either buy at 1.2095 or buy at 1.1985. In this case, if the order executes the purchase in 1.2095, the order to sell in 1.1985 will be automatically canceled.
  Remember to always know the specific information about the types of orders that the online broker you are using.

Summary

The most basic types of Forex orders (market, limit and stop-loss) are usually the ones that are used frequently and the only ones you'll probably need to trade Forex.

The other types of orders are used by certain traders to follow a particular trading strategy.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.