When you decide to place your orders with a forex broker, it becomes essential to find out the ways of placing the orders correctly and appropriately. You should place an order in accordance with how you will be going to trade. In other words, it implies how you will be entering and exiting the market. Inappropriate placement of order may end up skewing your entry and exit points. Orders have emerged as vital instruments for any type of trader and you should always consider them effectively. Orders are widely used to enter into a trade, protecting profits, and controlling the downside risk. When you gain knowledge of the difference between the types of orders, it will help you decide which order will be appropriate for you and suit your requirement aptly. It will also help you accomplish your trading goals. The various types of orders can be described below as:
A market order has emerged as one of the most common types of orders. The order can be used when you desire to execute an order instantly at its market price. It can be either the highlighted bid or the asking price reflected at your screen. You get the opportunity of using the market order to enter a new position, also known as buy or sell, or to exit a current position (buy or sell).
A stop order can be defined as the order that becomes a market order soon after an identified price is reached. One can use the stop order for entering a new position or for exiting a current position. A buy-stop order can be described as an instruction to purchase a pair of currency at the market price soon after the market reaches your identified price or higher. It is worth noting that the buy price must be more than the current market price. And, a sell stop order can be defined as an instruction to sell the pair of currency at the market price soon after the market reaches your identified price or lesser. The selling price must be lesser than the existing market price.
You can place a limit order when you are keen to enter a new position or to exit an existing position at an identified price or better. You will only be able to fill the order only if the market trades at that price or a better price. A limit-buy order can be defined as an instruction to make the purchase of the currency pair at the market price soon after the market reaches your identified price or lower. However, the price should be lesser than the existing market price. While a limit-sell order can be described as an instruction to sell the pair of currency at the market price soon after the market reaches your identified or more. The price must be more than the existing market price.
It can be described as an order that is set based on a preset number of pips away from the existing market price. A trailing stop will spontaneously track your position as the market surges in your favor. In case the market happens to move against you by the preset number of pips, the market order gets activated and stop order is implemented at the next available price as per the liquidity.
These orders may combine various kinds of orders and are utilized against a particular trading strategy. The order will necessitate that one of the orders must be triggered before the other order gets activated.
When you gain a good knowledge of the various types of orders, it will allow you to use the correct tools to accomplish your goals. It will guide you on how to enter the market and how to exit the market effectively. There are various types of orders available, but stop and limit orders have emerged to be quite common. Therefore, use them as per your convenience and comfort as inappropriate execution of orders may cause you huge loss. Apart from that, if you are a beginner then you must check out the list of Best Forex Brokers available in the market and choose from them.