Forex Orders

For a Forex Trader, this is necessary to learn and know well about all order types of the forex market. Order execution really a complex thing in this article we present where a trader gets difficulty and how to overcome the situation.

A basic discussion on proper order execution to avoid unexpected loss.

Order Types in Forex

Here we shall focus here on the trader perspective of the order execution process so that trader can avoid the wrong operation during trading in the terminal.

To trade in the forex market we need to trade in a terminal like Mt4 or cTrader. In any trading-terminal has the facilities to create and send orders to the trading server that fills the order. There are several types of trading orders. All orders are a kind of command by the client to place a trading transaction.

Generally, Ther are  4 Types of Order as follows

Market Order – This is an order that sends a command to buy or sell a financial instrument at the market / current price. This type of order instantly executes the trading position.

Pending order- This type of order opens or closes a position at a pre-defined price as soon as the market reaches the price. Hence, this position executes in the future.  Pending order is used when trading quotes reach a certain price. Pending order also has a few types like – Buy Limit, Buy Stop, Sell Limit, and Sell Stop. Stop Loss and Take profit orders are Pending order after activating stop loss and take profit order it relates to the open position.

Stop Loss – To cut losses and close a trade early, a stop-loss order used. If the market goes to the opposite of an open position then stop-loss order used. For a long position, it met the Bid price on the opposite for a short position it met the ask-price.

Take Profit – After opening trade we can set the desired level where the trade close with profit. This type of order closes the position. Like stop-loss orders, this order also met the Bid price for a long position and it met the Ask price in the case of a short position.

Placing Market Order – Exactly

This type of order is instant execution. With the market-order trader set the current price to execute the trade, here trader can set a slippage or a price deviation so that if the current move further certain points then also trade should be executed.

For example, The market is offering GBP / USD Ask price is 1.6842 right now. If we place the buy order your trading platform will instantly execute your order at this given price.

At the time of closing a position manually, the trader is also executing a market order but in the opposite direction of the open position. For example, to close a position bought in GBP / USD, the trader has to sell the same amount he has bought. This is what is also called a clearing or settlement operation.

It is important to note that with almost all brokers, your profits and losses will be calculated in the currency that you use to deposit to your forex account. For example, if we close a position bought in USD / JPY, it will be buying The Japanese yen again, but your profits or losses will be converted to the currency in which you have opened your account in the broker.

Stop Loss Strategy

Why does Stop Loss Hit earlier before the price level?

The problem of placing proper stop loss and pending order level and the solution to that problem

Sometime you may see that your order doesn’t trigger through the quotes reaches the price where you placed the order and sometime you may see that your stop loss hit earlier though the chart price doesn’t reach the price where you set the stop loss. Here another article on Proper Stop Loss placing to provide you more guidelines.

At the time of the execution of take-profit also you see that the price is going the profit zone, but you are not able to grab the profit and this makes you so worried. Below the cause of this and how to overcome this problem.

When a predefined order-level like stop loss, take profit, stop order, limit orders are staying above the current price of the market and is going to hit the level, then it will hit a few pips earlier before the chart price will reach to the level. How many pips earlier it will hit that will depend on the spread of the pair.

When a predefined order like – stop loss, take profit or pending orders are below the current price of the market and is going to hit the level. When it reaches to the level but it may not trigger due to spread. The market needs to go 2-3 pips more to trigger the order.

This type of issue can be seen in two types of trading as follows –

a.  Placing a Stop Loss For a Sell Order

In this situation, the SL level is above the current market price and it will hit 2-3 pips earlier, though the chart price will not reach the level and make you out of the trade.

How to Overcome: To overcome the situation you need to add spread to the SL. Or you can simply close the trade manually at the given SL level.

b. Placing Buy Pending Limit Order

In this case, the order level is below the current price level. Though the chart price reaches the level it may not hit your order because of the spread.

How to Overcome: In this situation, you need to add the spread with order price level to get triggered at the proper price.

 

So, a serious forex trader should know how to place proper Order on his terminal because this will help him to avoid false triggered and execute the order at the correct time.

You know that Forex trading can be much beneficial if you have a good Forex trading strategy that can identify proper trading signals. We have tested our own strategy to adapt our own style of trading. That is making a profit consistently. Test our trading strategy with us for FREE 

Related Articles

Are You Able to Set Correct SL?
Forex Stop Loss Take Profit & Trailing Stop