The term “order” refers to the method by which you enter or exit a trade. In this section, we will discuss the various types of forex orders that can be placed in the forex market. It’s essential to be aware of which order types your broker accepts, as different brokers may have varying policies regarding order types. While there are some basic order types that all brokers provide, there are also some less common ones that may seem unusual.
The term “order” refers to how you will enter or exit a trade. Here we discuss the different types of forex orders that can be placed into the forex market. Be sure that you know which types of orders your broker accepts. Different brokers accept different types of forex orders. There are some basic order types that all brokers provide and some others that sound weird.
Most brokers offer the following order types:
A limit order is a request to buy or sell a currency pair, but only when specific conditions outlined in the original trade instructions are met. Until these conditions are satisfied, the order remains a pending order and does not impact your account totals or margin calculations. The most common use of a pending order is to automate trades that execute when the exchange rate reaches a predetermined level.
For example, if you anticipate that the EUR/GBP pair is about to experience an upswing, you could place a limit buy order at a price slightly above the current market rate. If the exchange rate rises as you predicted and reaches your limit price, the buy order will be executed automatically, requiring no further action on your part.
A take-profit order automatically closes an open position when the exchange rate reaches a specified threshold. These orders are designed to lock in profits when you are unable to monitor your open positions.
For example, if you are long on USD/JPY at 109.58 and wish to realize your profit when the rate reaches 110.00, you can set this level as your take-profit threshold. If the bid price reaches 110.00, the system will automatically close your open position, securing your profit. The trade is executed at the current market rate. However, in a fast-moving market, there may be a discrepancy between the take-profit rate you set and the actual rate at which your trade is executed.
Similar to a take-profit, a stop-loss order is a defensive mechanism you can use to help protect against further losses, including avoiding margin closeouts A stop-loss automatically closes an open position when the exchange rate moves against you and reaches the level you specify. For example, if you are long USD/JPY at 109.58, you could set a stop-loss at 107.00 – then, if the bid price falls to this level, the trade is automatically closed, thereby capping your losses. It is important to understand that stop-loss orders can only restrict losses, they cannot prevent losses. Your trade is closed at the current market rate. In a fast-moving market, there may be a gap between this rate and the rate you set for your stop-loss. If your stop-loss is triggered when trading resumes on Sunday, your trade is executed at the current market rate, which may be lower than your stop-loss rate — resulting in additional losses. It is in your best interest to include stop-loss instructions for your open positions. Think of them as a very basic form of account insurance.
