When we place an order with a Forex broker, we have to know how to place it. Orders must be placed depending on what you are trading and always taking into account the points of entry and exit from the market. An error in placing the order can bust the entry and exit points, and then our strategy. Let's see closely the types of orders that can be placed on a common Forex platform.
Market orders
This is the most common type of order. A market order is used when we want to place an order immediately at the market price. In case of the Forex, the price is expressed as bid (sell) or ask (buy) on the platform. This order is then used to jump immediately into a buying or selling position, or to exit a position.
Currencies List
Limit Orders
A limit order is an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. The trader specifies the price at which he wants to buy / sell a certain currency pair and also specifies the duration for which the order should remain active.
GTC (Good till canceled). A GTC order remains active in the market until the trader decides to cancel it. The operator will not cancel the order, therefore it is the customer’s responsibility to keep in mind that he owns that order.
GFD (Good for the day) A GFD order remains active in the market until the end of the trading day. As the market of the foreign exchange is an ongoing market, we must identify an hour that can be considered as "the end of the day."
Stop orders
The stop order is an order placed to buy or sell at a certain price. The order contains the same two variables, price and duration. The main difference between a limit order and a stop order is that stop orders are usually used to limit potential losses in a transaction whilst limit orders are used to enter on the market, join to an already existing position and make a profit. The same variations are used to specify the duration as in limit orders (GTC and GFD). Here's an example:
Market Order in Trading Platform
Example: The trader buys 100,000 EUR / USD at 1.2885 expecting an upward movement but he wants to protect himself in case he has overestimated the potential strength of the Euro. He knows that 1.2830 is a strong level of participation in the market, so he executes a "stop loss" order to sell 10 pips below that level. The trader has limited his risk on this particular trade to 60 pips.
Buying Order in Market
Another usage of a stop order is when the trader is expecting a "blowout" of the price and he wants to grab the opportunity to 'ride it’. In this case, the trader will place an order to buy or sell 'on stop’. In order to illustrate what really happens beyond these operations, we can see the following scenario:
Example: The trader realizes that the EUR / USD ratio might rise above the resistance level 1.2420 where the neck line of the potential head and shoulder is placed. He believes that if this happens, the price of EUR / USD could reach 1.3120, the theoretical target of the figure above. At this point, the market is at 1.2420 so the trader has to enter a buy order for 500.000 at 1.2420 'on stop'.
EURUSD Buy Order
OCO
An OCO order (order cancels other) is a mixture of two limit and / or stop orders . Two orders with variables price and duration are placed above and below the current price. When one of the two orders is executed, then the other one is cancelled. In order to illustrate how an OCO works, we can see the following:
Example: The price of EUR / USD is 1.3150. The trader wants to buy above the trend line that joins the three downward tops, therefore 1.3290, otherwise, he wants to start a selling position if the price breaks the support that connects the three tops, therefore in case it falls below 1.3000 . So, if the trend falls below 1.300 (therefore the sales level entered just below the support, i.e. at 1.2990, will be hit) then he will sell 500.000 and the order at 1.3290 will be automatically erased at 1.3290.
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