Forex Orders Explained
Forex Orders are a fundamental part of currency trading, but the good news for beginner traders is that you only need to understand a few basic forex order types in order to commence trading.
Types of Forex Orders
A forex order defines how you will enter and exit a trade in the currency market, and there are several basic order types you should know about as a beginner trader.
A market order is an order to buy or sell currency at the best available or current price. Similar to a one-click bid that is used on platforms such as Amazon and eBay, you can place a market order and your trading platform will instantly execute a buy order at the exact ask price specified.
For example, the bid price for EUR/USD is currently 1.4120 and the ask price is currently 1.4122. If you want to open a trading position for EUR/USD, your broker (through your forex trading platform) would sell to you at the ask price of 1.4122.
A stop-entry order is an order placed to either sell below the market or buy above the market at a certain price. This type of FX order is used when you are speculating that the currency price will move in one direction eg. GBP/USD is currently trading at 1.4505 on an upward trend.
If you think the upward trend will continue if it hits 1.4515, you can set a stop-entry order at 1.4515, which is the same as sitting and waiting for the market to move and then buying in at 1.4515 – but without you needing to monitor the market.
A limit entry or Take Profit order is an order placed to either sell above the market (to close a long position) or buy below the market (to close a short position) at a certain price. To put it simply, the limit order closes the trade, unlike a market order, which enables traders to lock in a specified maximum profit on a given trading position.
This type of forex order is a good option for beginner traders or if you are unable to monitor your trading positions.
A stop-loss order is a type of order linked to a trading position which prevents or caps your losses if the market price is not in your favour. This type of order does not secure a profit, but instead limits your losses, which is very important to keep in mind for risk management when trading using high leverage.
A stop-loss order will remain in place until your position is closed (hits the stop) or you cancel the stop-loss order. A trailing stop is a type of stop-loss order whereby the stop moves as the price fluctuates.
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