Forex Trading Basic

Forex Trading Order Types and Their Uses

Pivot Point Break Out Strategy in Forex Trading

A Forex trader has recourse to different Forex trading order types in order to enter and exit the Forex markets. These different types of orders allow the trader to specify precisely as to how his broker should fulfill his Forex trades. This article explains the different Forex trading order types that are possible to place in trading.

Forex Trading Order Types

Market Order

It is one of the most common Forex Trading Order Types executed in the Forex spot market. A Market order is a type of order to buy or sell a currency at the current price available in the market. On the other way, when placing a market order you buy as per current Ask price and if you are selling, that would be as per current Bid price. This is the rule you have to follow and not a choice or exception. These Forex trading order types can be used to enter a new position (buy or sell) or to exit from current position (buy or sell).

Pending Order

Pending order is good in a way that it allows traders to buy and sell currency pair at a pre-defined price in the future. Actually, this type of order is used to execute a trade if price reaches the pre-defined level; the order will definitely not be filled if price does not reach this level. There are 2 types of pending orders available in MT4 platform:

Limit Order

Limit orders are the trade orders placed to buy or sell currencies only at a particular price. Just the way a market order works, a limit order is also executed at the Forex spot market. But the main differences of limit order and market orders are that the transaction takes place only if the traded currency reaches the limit set by you before you bought or sold.

In other ways, limit order types will help you to limit the maximum price you pay when you buy a foreign currency or limit the minimum price when you sell a currency. So, generally a limit order will protect you, in that you don’t need to buy a currency for a higher price and don’t need to sell a currency below a minimum price.

Two types of limit orders are possible depending on the direction of the position:

  • Limit-buy order
  • Limit- sell order

A) Limit-buy order

A limit-buy order is an instruction to buy the currency pair at the market price if the market reaches your specified price or lower. The limit-buy order price level is always set below the current market price.

B) Limit-sell order

A limit-sell order is an instruction to sell the currency pair at the market price if the market reaches your specified price or higher. Note that the limit-sell order price level is always set above the current market price.

Stop Order

Another Forex trading order types is there, known as stop orders. A Stop Order is an order which is not executed by your trading platform until the market price has reached your desired price. In other ways, a stop order of a currency pair will be executed only when the currency reaches a particular price referred to as the stop price. Whenever the currency reaches this price, a stop order will be converted into market order as it will get executed.

The Sell and Buy Stop order is reverse to the Sell and Buy Limit Order. The Sell Stop Order is Always set below the current market price, while the Buy Stop Order is Always set above the current market price. When the market reaches these stipulated prices, it executes and becomes a market order.

Two types of stop orders are possible depending on the direction of the position:

  • Stop-buy order
  • Stop-sell order

A) Buy Stop order

An order to buy a security at a price above the current market bid. A stop order to buy becomes active only after a specified price level has been reached (known as the stop level). Stop orders work in the opposite direction of a limit order, with buy stop orders placed above the market and sell stop orders placed below the market. Once a stop level has been reached, the order will be immediately converted into a market or limit order.

B) Sell Stop Order

An order to sell a security at a price below the current market asks. A stop order to sell becomes active only after a specified price level has been reached.

Forex Trading Order Types and Their Uses

Stop loss order

A stop loss order is quite similar to limit order, but what is more important is that- it is linked to an open trade and prevents losses if the price goes against you. A stop-loss order remains effective until it is executed or cancelled.

Suppose, you are buying EUR/USD at 1.3541. And you are setting a stop loss order at 1.3521. That means you are limiting your maximum loss. In other ways, if your calculation goes wrong and EUR/USD drops to 1.3521 instead of moving up, the stop loss order will be automatically executed at 1.3521 and close the position for a 20 pip loss.

The advantage is that you won’t have to sit in front of the computer in order to monitor price levels and prevent losses from occurring. Similarly, a stop loss order can be set on any open position.

Take Profit

A take profit order is sometimes called a profit target order. This Forex trading order type is intended to close the trade at a profit once it has reached a certain level. When Take Profit order is executed, it closes the position. This type of order is always connected to an open position of a pending order.

The Bottom Line: Forex Trading Order Types

No every broker will allow same order conditions for you. You will find some broker having certain restrictions over pending order or SL and TP settings. All you need to do is find a broker providing order placing freedom to the forex traders. We can recommend HYCM Broker on that matter. Read HYCM Broker review to learn more on this.


Chapter 2Forex Trading Basics
Lesson 1Forex trading Currency pairs
Lesson 2What is pip
Lesson 3what is spread in forex trading
Lesson 4.What is leverage in Forex
Lesson 5Forex Trading Order Types

Go back to Main Page: Forex Trading for Beginners

About the author

Md Chhali Uddin

Md Chhali Uddin is a Renowned Financial Analyst. He is also involved with as a writer and financial Analyst. He is a brilliant Financial geek with vast experience in every sector of Currency Trading.

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