Forex Order Types

Orders are basically moves a trader makes to see through their trading strategy. This is why it is important that before you go into this business you learn about them first.

More than anything else they help you manage risk. These orders, when set, relieve you of some of the pressure to sit and watch your positions all day. They take care that you are not in an abominable amount of loss when you come back from your break.

We’ll start with the mostly commonly used and basic ones.

Market Order

Going long or short at market would be the best price available at market. If you like the price you click and it’s yours.

Limit Order

A limit order is if you want to enter or exit a position at a specific price or one that’s better. There’s a sell limit and a buy limit. A sell limit will be placed at a specific amount or higher and a buy limit will be placed to buy at a specific amount or lower. However, this means that you will not definitely enter or exit a position. It will only happen if the market meets your prices.

Stop Order

There are different kinds of stop orders.

In a Stop Entry Order there is a stop buy and a stop sell. The order is set to buy when the ask price is reached. The order will initiate a sell when the bid price is reached. It is different from the limit order in that in limit you define a range that will work while here you give specific acceptable ask and bid prices.

A Stop Loss Order will manage risk. If you are in a long position a sell stop will kick in if the price starts falling and so you will be made to exit and sell at a reasonable price before it plummets. Similarly, if you are in a short position a buy stop will kick in causing you to buy at a reasonable price before the prices skyrocket. You decide what the value for your stop loss is going to be.

A Trailing Stop gives you the chance to hold out to a certain pip range. For example, if you sell EUR/USD at 1.2450 and set a trailing stop at a difference of 20 pips. If the price goes against you by 20 pips, that is the rate increases to 1.2470, your position will be closed to avoid more loss. On the other hand, if the market moves in your favor then your trailing stop will adjust according to the changing prices. Your position will only be closed at the trailing stop if you are in loss.

Contingent Order

There are many types of contingent orders. These are basically a combination of actions planned strategically. They might involve two or more transactions happening one after the other. In this the conditions for execution of one will be dependent on the other. These types of orders are only available on brokerage platforms and then too they are not available on all.

If/Then is a contingent order in which the ‘then’ order will activate only if the ‘if’ order’s conditions are met and it activates first. Basically, if this then that. The ‘then’ order is not connected to rates and is a single order in this case. Its execution solely depends on the ‘if’. Should the ‘if’ order not activate for some reason, ‘then’ will not either. However, if one part, whichever, is called off, the other shuts down too.

If/Then OCO is a contingent order in which the ‘then’ could be a couple or more of unassociated orders. So if ‘if’ activates, then the ‘then’ orders will also be executed but here One Cancels Other (OCO). The cancelling happens between the multiple ‘then’ orders. If the condition for one is met and it activates, then the other ‘then’ will be cancelled. Like the simple if/then here too, should ‘if’ not start for some reason, ‘then’ orders won’t either.

Like the above One Cancels the Other (OCO) order type, there is a One Triggers the Other (OTO) type too. This means that if your main order’s condition is met and it is initiated, the others are also activated. These ‘others’ will probably be a stop loss order and a buy/sell limit or the something like that which will basically help manage risk even if you’re not supervising your trade.

You can also set an expiry date for any of these above mentioned orders. There are two types.

  • Good till canceled- this means there is no expiry date for that order as such. It will stay in place till you cancel it.
  • End of day- this order type will be reset at the end of the trading day. Next time you trade you will set new orders.

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