When it comes to forex trading, the devil is in the details. There is plenty of ancillary information you have to know to properly succeed. However, before you even start, try to keep an eye out on what forex orders you want. Different types of orders can give you different advantages in certain situations. The strategy you employ and the way you use it is also important. It is best to think of the tools as several different tools in your arsenal.
Generally speaking, trades in the forex world revolve around trading one currency for another. Sometimes, though, things are a tad more complicated than that. On every trade you decide what trade you want to do, then trade. Before you place an order, be aware that there a number of orders you can commit.
This is the first and most simple type of forex order. You get a broker to trade your currencies. Then they find a willing trader and complete the transaction. Since we are talking about the forex trading world, though, this process is almost instant. So you simply trade with someone and get the currency you asked for instantly. Pretty simple.
Limit Entry order
This type of forex order is a bit more advanced. However, it is still quite easy to get your head around it. What it does is allow you to buy lower than what the market price is, if you are buying. If you are selling, you can sell higher than the market price.
This means you are looking for individuals who are willing to trade at these prices in the future. Technically speaking, you do pay the price, but the order is not filled until the market price reaches the limit order level. This type of order further helps your goal in maximising your profits.
You generally have to set the price you want yourself. This means that it is best to be wise, and not overestimate what you could get away with.
Stop Loss order
The idea is similar to the limit entry order, but you just want to minimise losses. You set a certain price point for your broker to trade at, and they trade automatically when the value reaches said point.
Say you make considerable profits on a currency, but you keep going with it, as it is in a bullish trend. To ensure that you keep your current gains, you can set this stop forex order. If things do not go your way, your broker can still make sure you get that set amount.
This can be especially helpful in forex, as it is a very fast environment. If you are not paying attention, things could suddenly get out of control. Stop orders make sure that does not occur.
Traders use this for two scenarios. If you are shorting a currency, you can set a buy stop order. In the opposite situation, there is a sell stop order.
Trailing Stop order
This is, again, a bit of a spin on the previous type of forex order. Rather than focus on minimising losses, its main desire is to make sure you maximise whatever gain you made.
How does it do this? Well, basically, its much like a stop-loss order, in that once the threshold is reached, the broker will trade. However, the twist is that the stop order moves along with the gains. It adjusts automatically. So, you do not set up a price to trade at. Instead, you set a trail price. This could be a flat figure or a percentage. The stop order price would then be the market price with a deduction of the trail price. Once the price of the currency starts falling, the trail price does not move.
It is best to be careful at where you set your stop orders, though. If you set it to be far too tight, insignificant market dips could result in you pulling out too early. Without you even realising. If you are too large with the order, you risk losing an unnecessary amount. It is best for every trader to figure out the right balance for them.
Today, we have discussed the main forex orders you may come across. All of them can help you in some way, but you need to know how they can be useful to you beforehand.