Which Are The Different Types of Forex Orders?

O

rder is a firm order given by the customer to execute the transaction under certain conditions.

There are several types of orders – market order, limit order, stop order, EOD (one cancels the other), order to cancel, order for the day and more.

“Can I order already?”

“No! Before you get your wallet wide open for placing an order, you need to get the menu and get to know all types of orders. Only when you know them by heart, then you can place your order, sir!”

Basically, the term “order” refers to how you will enter or exit a trade.

Forex Orders

Here we discuss the different types of orders that can be placed in the forex market.

Different brokers accept different types of forex orders.

Order Types

Market order: 

With this execution mode, the order is executed at the best available price. Sending the order in such mode means prior consent for execution.

Pending order:

The deferred order is made by the client to the brokerage company to buy or sell securities at a predetermined price in the future. 

This type of order is used to open a trading position provided that future quotes reach a predetermined level. There are four types of deferred orders in the terminal

Orders fall into two sections:

If you want to buy or sell something at the best available price, you will make a market order. 

Let’s look at an example: the bid price for EUR/AUD is at 1.57374 and the ask price is at 1.57376.

If you want to buy EUR/AUD, then you have to pay the price of 1.57376.

By clicking buy,  your trading platform will instantly execute a buy order.

When you place a market order, you can’t control the price your market order will actually be filled at.

Limit Order

A limit order is useful when you want to either buy below the market or sell above the market at a certain price.

It will buy or sell once the market reaches the limit price.

Buy Limit is a pending purchase order placed below the market price.

Orders of this type are usually placed in anticipation of the price of the respective instrument, after it has fallen to a certain level, to rise again.

Example: If EUR/USD is quoted at 1.3850 / 52, one example of a Buy Limit would be a purchase requisition at a level of 1.3800 by placing a pending order. 

In this case, if the “sell” price (ASK) for EUR/USD reaches 1.3800, you will be in a long EUR/USD position.

Sell Limit is a pending sales order placed above the market price. 

Orders of this type are usually placed in anticipation of the price of the respective instrument, after it has risen to a certain level, to fall again.

Example: If EUR/USD is quoted at 1.3850 / 52, one example of a Sell Limit would be the sale request at 1.3900. 

In this case, if the buy price (BID) for EURUSD reaches 1.3900, you will be in a short EUR/USD position.

Instead of staying in front of the monitor and waiting for your expected price, you can go and take your child from kindergarten and once the market reaches the “limit price” the order is triggered and executed at the “limit price” (or better).

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

A limit order to BUY at a price below the current market price will be executed at a price equal to or less than the specified price.

A limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specific price.

Stop Entry Order

A stop order will “stop” your order from executing until the price reaches a stop price.

If you want to buy only after the price rises to your stop price or sell only after the price falls to your stop price, you will execute your stop order. 

Buy Stop is a pending purchase order placed above the market price. 

Orders of this type are usually placed in anticipation of the price of the respective instrument, after reaching a certain level, continuing to rise.

It is triggered when the market price touches or goes through the Buy Stop price.

Example: If EUR/USD is quoted at 1.3850 / 52, an example of a Buy Stop would be placing a pending purchase order at 1.3900.

 In this case, if the sell price (ASK) for EUR/USD reaches 1.3900, you will be in a long EURUSD position.

Sell Stop is a pending sales order placed below the market price.

Orders of this type are usually placed in anticipation of the price of the respective instrument, after reaching a certain level, continuing to decline. 

Example: If EUR/USD is quoted at 1.3850 / 52, an example of Sell Stop would be placing a pending sales order at 1.3800. 

In this case, if the buy (bid) price for EUR/USD reaches 1.3800, you will be in a short EUR/USD position.

You see that the green line is above the current price. Let’s say you place a BUY stop order here, in order for it to be triggered, the current price would have to continue to rise.

But the red line is below the current price, which means that if you place a SELL stop order here, in order for it to be triggered, the current price would have to continue to fall.

The stop order will ONLY be executed when the price becomes less favourable to you.

STOP LOSS ORDER

Stop Loss is designed to reduce losses when the price moves in a direction unfavourable for you.

You can put a specific price that will be the maximum level you are ready to lose if the price goes down. You want to prevent any losses below this level. 

Remember that until the position is liquidated or you cancel the stop-loss order, your stop-loss order will remain in effect.

For example, you went long (buy) EUR/JPY at 126.203. To limit your maximum loss, you set a stop-loss order at 126.180.

This means if you made a mistake by predicting it will move up and  EUR/JPY drops to 125.180, your trading platform would automatically execute a sell order at 125.180 and close out your position for a 23-pip loss.

“STOPP!” “STAY STILL” 

If you order a stop loss, you won’t worry that you will lose your money if you don’t stay in front of the monitor all day. 

Note that the price specified in the STOP ORDER is the price at which the order is activated. 

When this price is reached, a market order is activated. 

Trailing Stop

But what if the position becomes a winner?

Then the Stop Loss can be manually changed to a break-even level. 

To automate this process, the “Trailing Stop” option has been created. 

Let’s see the following:

Suddenly the price changes in a more profitable direction, the Trailing Stop will cause the Stop Loss level to follow the price automatically, but if the profitability of the position falls, the order will no longer be changed.

For example, you’ve decided to short EUR/JPY at 126.15, with a trailing stop of 20 pip.

Originally your stop loss was at 126.35. If the price goes down and hits 126.05, your trailing stop would move down to 126.25 (or breakeven).

It is of high importance to NOT FORGET that your stop will STAY at this new price level. It will not widen if the market goes higher against you.

Your trade will remain open as long as the price does not move against you by 20 pips.

Once the market price hits your trailing stop price, a market order to close your position at the best available price will be sent and your position will be closed.

Limit Orders versus Stop Orders

If you are already confused among the orders. Don’t worry! You are not the only one. 

Limit orders are often mistaken with stop orders because both specify a price.

Let’s make it clearer. 

Both types of orders are regarding what price traders are willing to trade in the future.

The difference is in the purpose of the specified price.

A stop order activates an order when the market price REACHES OR PASSES a specified stop price.

Take for example that GBP/USD is trading at 1.3688, you have a stop entry order to buy at 1.3708. Once the price reaches 1.3708, your order will be executed. But it doesn’t necessarily mean that your buy order was filled at 1.3708. If the market was moving fast, you might’ve been filled at 1.3709. 

In other words, there is NO guarantee if your order will get filled worse or better than the stop price. It will be determined by how much the price is fluctuating when the market price reaches the stop price.

The stop price simply can be referred to as a threshold for your order to execute. At what exact price that your order will be filled at depends on market conditions.

A limit order can only be executed at a price equal to or better than a specified limit price.

For example, GBP/USD is trading at 1.3688, you have a limit entry order to buy at 1.3678. Your order will not be filled unless you can get filled at 1.3678 or better. 

Let’s say that the limit price is your price guarantee. By setting a limit order, you are guaranteed that your order only gets executed at your limit price (or better).

Where is the catch here?  The market price may never reach your limit price so your order will never be executed.

In the previous example, GBP/USD may only fall down to 1.3679 before skyrocketing. 

So even though you wanted to go long GBP/USD, your order was never executed since you were trying to enter a long position at a cheaper price. 

Unfortunately, you would have just watched how GBP/USD rise without you taking your chance. 

This is the tradeoff when using a limit order instead of a market order.

Weird Forex Orders

Ladies and gentlemen, if you did think that that was all for tonight’s show. You are wrong!!

Here they come on the scene!. They are our weirder performers. We bet that they will entertain you and keep you on your toes! Applause for our WEIRD FOREX ORDERS! 

Good till Canceled (GTC)

The order remains active until it is executed or explicitly cancelled. It is your responsibility to remember that you have the order scheduled.

Good for the Day (GFD)

Order valid until the end of the day. Such orders, in case they are not fulfilled, are automatically cancelled at the end of the day.

It will usually mean 5:00 pm EST when the U.S. markets close, but better check with your broker in advance. 

Both GFC and GTC are known as “time in force” orders. 

Imagine your home robot, which you set to go cleaning every day from 2 pm till 4 pm. The robot will be active only during the time frame you set, then it will quit cleaning and go charge itself. 

The “time in force” orders define exactly this time frame over which an order will continue working before it is cancelled. 

Rollover

Renegotiation of a maturing transaction.

Option Premium

The purchase price of the option agreed between the two parties and payable by the buyer with the spot value date.

One-Cancels-the-Other (OCO)

An OCO order is a combination of two orders that are placed above and below the current price. Only when one of the orders is executed, then the other order is cancelled.

Let’s say that the price of GBP/USD is 1.3732 at the moment.

You want to either buy at 1.3782 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.3700.

It will proceed in the following way:  if 1.3782 is reached, your buy order will be triggered and the 1.3700 sell order will be automatically cancelled.

One-Triggers-the-Other (OTO)

The opposite of the previous order(OCO) is this One-triggers-the-other (OTO), as it only puts on orders when the parent order is triggered.

The OTO order will be useful if you decide that you want to set profit taking and stop loss levels ahead of time, even before you get in a trade.

Let’s take as an example  USD/CAD.

It is currently trading at 1.3000. You believe that once it hits 1.3100, it will reverse and head downwards but only up to 1.2900.

If you don’t want to miss the moment when you can profit and you are not in front of the monitor, you set a sell limit at 1.3000 and at the same time, place a related buy limit at 1.2900, and just in case, place a stop-loss at 1.3100.

As an OTO order, both the buy limit and the stop-loss orders will only be placed if your initial sell order at 1.2000 gets triggered.

Keep up and continue walking through our steps of becoming a successful trader. 

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