Forex Trading Order Types

An "order" refers to how you will enter or exit a trade. Below, we will discuss the different order types. Once you place an order successfully, it means you have entered the Forex market.

There are some common order types that are offered by almost all Forex brokers, and of course, there are also some strange-sounding order types.

order types

market order

A market order is an instruction to immediately buy or sell a certain number of contracts based on the best price or market price in the market at that time.

For example, the current buying price of EUR/USD is 1.2140 and the current selling price is 1.2142. If you wanted to buy EUR/USD at the market price, the price the market would sell you would be 1.2142. You will click the buy button on your trading platform with the click of a mouse and the system will immediately execute the buy order at that price.

limit order

Limit order (Limit Entry Order), that is, setting a buy order at a point below the market price, or setting a sell order at a point above the market price. When the exchange rate reaches the set price target, the order will be automatically executed, otherwise, it will not be executed.

For example, the current exchange rate of EUR/USD is 1.2050. You plan to go short when the exchange rate reaches 1.2070. At this time, you have two options: either sit in front of the computer and wait for the exchange rate to rise to 1.2070 before going short at the market price, or set a limit order at 1.2070. Then, you stay away from the computer and wait for the system to automatically execute the order.

You can use a limit order when you believe that the price will reverse course after hitting the price you set.

Setting a stop-loss order (Stop Entry Order) means that you set a buy order at a point higher than the market price, or a sell order at a certain point below the market price.

This strategy is used when there is a breakthrough in the market. For example, if a trader believes that when the exchange rate reaches a certain price, it will confirm the establishment of the current trend and will continue this trend, in this case, this strategy can be used.

For example, the current price of GBP/USD is 1.5050 and is in an upward trend. You believe that if the price hits 1.5060, it will continue to rise. At this time, you also have two options: first, sit by the computer and buy at the market price when the exchange rate reaches 1.5060, or choose to set a stop-loss order by yourself. When you feel that the price will continue to move towards the current price, you set a stop-loss buy order at 1.5060.

stop-loss order

The purpose of setting a stop-loss order is to avoid additional losses in time if the price fluctuates in the opposite direction to your judgment.

Please keep this type of order in mind. Stop-loss orders will remain in effect until your position is closed or you cancel the stop-loss order.

For example, you plan to go long EUR/USD at 1.2230. To limit your maximum loss, you place a stop loss order at 1.2200. This means that if your direction is wrong and EUR/USD falls below 1.2200, your trading platform will automatically execute your sell order at 1.2200 and automatically lock in a 30 pip loss.

Stop-loss orders can be very useful if you don't plan on sitting in front of a computer all day, worrying that you are going to lose all your money. When you open a position, you can set a stop loss order.

Stop Loss

Trailing Stop means that the stop loss point set keeps changing as the price fluctuates.

For example, you plan to short USD/JPY at 90.80 and set a 20 pip trailing stop. This means that initially, your stop loss is at 91.00, and if the price drops to 90.50, your stop loss becomes 90.70.

As long as the price changes in the same direction as your judgment, or even if it is in the opposite direction but does not reach 20 points, your order will always be valid. Once the price reaches the trailing stop, the stop loss order is automatically triggered, and your position will be automatically closed.

Exotic order

Good until canceled order (GTC)

GTC order (Good 'Till Canceled) means that the order will remain valid until you cancel it. Your broker cannot cancel this order at any time.

Order valid for the day (GFD)

GFD order (Good for the Day) is valid until the end of the current trading day. Because the Forex market is a 24-hour trading market, this usually means that the order will be automatically invalidated after the New York market closes. However, we recommend that you confirm this with your broker.

Optional commission order (OCO)

Selective orders (One-Cancels-the-Other) bundle stop-loss orders and profit-taking orders to ensure that when one of the two orders is executed, the other will be automatically invalidated.

Let’s take EUR/USD as an example. If the EUR/USD exchange rate is 1.2040, you want to buy at 1.2095 after the exchange rate breaks through the resistance level, but you also want to go short when the price falls below 1.1985. When you choose the OCO order, if the exchange rate hits 1.2095, a buy order will be triggered, and then the sell order at 1.1985 will be automatically canceled.

OTO order

OTO order (One-Triggers-the-Other), that is, it is possible to trigger an OTO order only after the current order is triggered. When you plan to set profit targets and stop loss targets in advance, even before you place a trade, you can set an OTO order.

For example, the current exchange rate of USD/CHF is 1.2000. You believe that once the exchange rate hits 1.2100, the trend will reverse, but it will only fall to 1.1900 at most. The problem is, you're going to be traveling for a week, and you won't have access to the Internet for that week.

In order to seize this market wave you judged, you can set a limit sell order at 1.2000, at the same time, set a limit buy order at 1.1900, and set a stop loss order at 1.2100. In the OTO order, if the sell order of 1.2000 is triggered, both the limit buy order and the stop loss order may be executed.

Conclusion

The basic order types are usually what most traders need.

Unless you are an experienced trader (don't worry, enough patience and time will make you an experienced trader), do not design your trading system to allow the execution of a large number of uncommon orders.

Also, always check with your broker for specific order information to determine whether rollover fees will apply if a position is held for more than one day.

Keeping your orders simple and easy to operate is the best strategy.

Unless you are very familiar with the trading platform you are using and are comfortable with it, do not start trading with a real account. Incorrect transactions are more common than you think.

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