Types of orders

Market orders

A market order is an order to buy or sell at the best available price.

For example, let’s say the bid price for EUR/USD is currently at 1.2140 and the ask price is at 1.2142.

If you wanted to buy EUR/USD at the market, it would be sold to you at the price of 1.2142.

When you click “Buy,” the trading platform will instantly execute a buy order at the current price*.

*Please note: Due to slippage, the quoted prices may change between the time you place the trade and when it is executed through the platform.

Pending Order

Limit orders

A limit order is an order placed to either buy below the market or sell above the market at a certain price.

• You place a “Buy Limit” order to buy at or below a specified price.
• You place a “Sell Limit” order to sell at a specified price or better.

Once the market reaches the “limit price” the order is triggered, and your trading platform will execute the trade at the “limit price” (or better).

For example, let us say the EUR/USD is currently trading at 1.2050, and you want to go short if the price reaches 1.2070.

You can either sit in front of your monitor and wait for it to hit 1.2070 (at which point you would manually click a sell market order), or you can set a Sell limit order at 1.2070, then walk away from the screen and not have to monitor the markets.

If the price went up to 1.2070, your trading platform will automatically execute a Sell order at the best available price.

You would use this type of entry order when you believe the price will reverse upon hitting the price you specified.

Stop entry orders

A stop order “stops” an order from executing until the price reaches a specified stop level.

You would use a stop order when you want to buy only after a price had risen to the stop price or sell only after the price falls to the stop price.

• You place a “Buy Stop” order to buy at a price above the market price, and it is triggered when the market price touches or goes through the Buy Stop price.
• You place a “Sell Stop” order to sell when a specified price is reached.

For example, let us say the GBP/USD currency pair is currently trading at 1.5050 and is trending upward. You believe that the price will continue in this direction if it hits 1.5060, so you could do one of the following methods:

• Sit in front of your computer and buy at the market when it hits 1.5060, or
• Set a stop entry order at 1.5060

If you choose the second option, the trade will automatically execute at the set price, meaning you do not have to sit around monitoring the markets!

Stop loss order

A stop loss order is an order to close out a trade position if the market price reaches a specified price, which may represent a profit or loss. The purpose of a stop loss order is to prevent additional losses if the price goes against you.

For example, if you go long (buy) EUR/USD at 1.2230, anticipate that the market price would go up. To limit your potential losses, you set a stop loss order at 1.2200.

If your predictions were wrong and the price of EUR/USD dropped to 1.2200 instead of moving up, your trading platform would automatically execute a sell order at 1.2200 (or the best available price) and close out your position for a 30-pip loss. While you have still incurred a loss, it may be limited when compared to the same trade that did not have a stop loss in place.

A stop loss order remains in place until the position is liquidated, or you cancel it.

Trailing stop

A trailing stop is a stop loss order that is always attached to an open position, and which automatically moves once the profit becomes equal to or higher than a level you specify.

For example, let us say you decide to go short on the USD/JPY at 90.80, with a trailing stop of 20 pips. This means that originally, your stop loss is at 91.00. If the price goes down and hits 90.60, your trailing stop will move down to 90.80 (or breakeven).

Just remember though, that your stop will STAY at this new price level. It will not widen if the market goes higher against you. If USD/JPY hits 90.40, then your stop would move to 90.60 (or lock in a 20-pip profit).