How many forex orders types there are
and how to use them in your favor?
Once you have decided to
enter the Forex trading world, one of the first things you will have to do
is downloading the trading station provided by your chosen forex broker
for free. When you open your trading station software, you will find there
are two main ways to enter a market or, said in another way, there are two
ways to place an initial order to buy or sell any currency pair.
“Market order”; this is an order to buy or sell a currency pair at the
market price the instant that the order is received and processed (within
seconds of hitting the "OK" button on your screen). When a market order is
placed, you are simply saying "I'll buy or sell the currency pair at
whatever price it is at when my order gets processed."
“Entry order”; this is an order to buy or sell a currency pair when it
reaches a certain price target. This can be any price in theory. You could
set an entry order for the low price of a time period, or the high price
of a time period. As an example, one usual recommendation is that you must
always set an entry order to be the same price as the ‘open price” of the
time period. When you place an “entry order” to buy, for example, you are
simply saying "I want to buy this currency pair at a certain price, if it
never reaches that price, I don't want to purchase the pair."
After your “entry order”
is placed, you can set a stop and/or limit order if you desire, and for
your own security. Stop and Limit orders are two different ways to exit a
trade, automatically (i.e., without closing out your position via the
click of your mouse - manually), after the trade is entered.
A “stop order” (something I will always recommend you) is used to stop
losses. A “limit order” (recommended if you can't monitor your open trade)
is used to redeem profits. Where these orders are placed, in relation to
your open trade, depends on the direction of the entry order.
Remember; a “stop order” is always placed below the current market value
of that currency pair when you are in a long (buy) trade. And a “limit
order” is always placed above the current market value of that currency
pair when you are in a long (buy) trade.
