Forex traders rely on a number of orders for entry and exit points in the forex market. Therefore, having a clear understanding of the various forex order types is an important money-making hack.
In addition to mastering various forex-trading secrets, it is important for traders engaged in either manual trading or automated trading to have a clear understanding of the various order types. The different types of forex orders play a pivotal role in the management of trades in the trillion-dollar market.
In forex, order refers to how traders enter and exit trades. While different fx brokers accept different types of forex orders, almost all forex expert advisors offer support to four main types of forex orders.
- Market Orders
- Limit Orders
- Stop Orders
- Take Profit Orders
- Stop-Loss Orders
A market order is a common forex-trading instrument used hand in hand with various forex charting tools. A market order allows traders to execute instant orders in the forex market. In this case, one is able to buy or sell a currency pair instantly, be it via manual trading or through a forex robot.
For instance, say EUR/USD is trading at 1.0850/52. With a market order, a trader or an FX Expert Advisor would be able to buy Euros at 1.0852. Similarly, with the help of a market order, one would be able to sell euros at the bid price of 1.0850.
Limit Entry Orders
A limit order is a special type of forex order that becomes active only when certain conditions are met. It is one of the best orders to use in position trading as it relieves the burden of having to spend too much time on the screen. The entry and exit order is often used with various chart patterns when traders want to take advantage of various price targets.
Therefore, the proprietary trading order makes it possible to buy below the current market price; similarly, it makes it possible to sell above the prevailing market price.
Consider USD/JPY pair trading at 110.30. Regardless of whether a trader is engaged in automated forex trading or using an FX EA, it would be possible to place an order for execution later. With the help of a limit, a trader can place a sell limit order at 110.80. In this case, the short position would be executed once the price rises and hits the 110.80 marks.
Limit orders tools are ideal for automated FX trading as they alleviate the need of having to spend too much time on the screen, waiting for price action to happen. The limit order, in this case, operates as an algorithmic FX trading tool, waiting for traders.
Stop Orders operate the same way as limit orders as they allow traders to buy above the prevailing market price or sell below the prevailing market price. The automated FX trading tool becomes market orders only when certain conditions are met.
For instance, if USD/JPY is trading at 110.30, you can place a buy stop order at 110.80. Once the price reaches 110.80, a buy market order would be activated, allowing you to benefit on further price gains.
Take Profit Orders
A target forex order is a special type of forex order commonly used in automated FX trading as well as manual trading. The order type automatically closes an open position once a given target price is reached. Similarly, the order type makes it possible to lock in profits on trades.
For instance, if you place a market order on USD/JPY at 110.80 and specified take profit at 111.00. The Take profit order would close the tarred at 111.00 and lock in the profits.
A Stop Loss Order
A Stop Loss order is an important forex trading instrument that allows traders to limit losses when trading manually or in automated Forex trading. Operating as a Forex EA, this type of order closes an open position once a trade starts going against you.
For instance, if you bought USD/JPY at 110.80 and specified a stop-loss order at 110.60. The stop-loss order would close the order once the 110.60 price is reached, consequently limiting the accumulation of further losses. Conversely, a stop-loss order is an important forex-trading secret for traders who have mastered money making hacks in the forex market
Trailing Stop is an advanced stop-loss order that moves as the underlying price of a currency pair fluctuates. Let us say you buy USD/JPY at 110.80 and place a trailing stop of 20 pips. What this means is that the initial stop loss would be at 110.60. Once the price moves up to 111.00, the trailing stop would adjust as part of automatic forex trading to 110.80.