Which Forex orders exist?
When you start investing with a broker, you can choose from different types of orders. By choosing the right options, you can maximize your profits and minimize your risk.
What is a market order?
A market order can be seen as an instantaneous order. The broker will try to open the order as soon as possible after which the position will be tracked. The loss or profit made on the position will be immediately tracked. You can read more about profits and losses when trading CFDs in our dedicated article.
The use of a market order is not recommended when you invest in a very volatile currency pair. The price can spike, causing you to suddenly pay much more than intended. On more stable pairs like the euro dollar, however, you can safely use a market order when you want to open a position immediately.
If the price on EUR/USD is 1.2, and you place a market order, you immediately open a position at the current price of 1.2.
Long or short order
You can choose to place a long or short order. With a long order, you speculate on a rise of the price, whereas with a short order, you speculate on a fall of the price. In this way you can bet on good and bad news.
Placing a long or short order is easy with most brokers. For a long order, you simply use the buy option and for a short order you use the sell button.
Use limit order
A limit order is an order that is not executed until a certain value is reached. Again, you can go both long and short. By setting a limit order to a low value (buy) or a high value (sell), you can open positions strategically and fully automatically and achieve a good result.
If, for example, the price keeps on hitting a certain resistance during the week, after which the price rises again, you can place a limit order there. When the resistance is hit, automatically a position will be opened. When the price then rises again, you will obtain a good investment result.
Setting orders is easy with an online broker. Illustrative prices.
If the price on EUR/USD is 1.2, and you place a limit order for 1.25, the position will open as soon as the 1.25 price level is reached.
Stop loss / take profit order
It is also possible to place a stop loss or take profit order. The position is then automatically closed at a certain value. It is always advisable to place a stop loss: in this way you limit and determine the maximum loss. Sometimes it can also be attractive to use a take profit. That way you can close the position at a certain value at which the price often tilts.
By tactically determining the moments when you take profits and when you take losses, you can optimize the profits on your Forex positions. It is always advisable to already think about an exit strategy before you open a position: that way your decisions will not be influenced by your emotions.
What is a trailing stop?
A trailing stop can be useful when you expect a rise followed by an almost immediate correction. A trailing stop is, in fact, a moving stop loss. With the trailing stop, you determine an amount of decrease at which the position should be closed. This value, however, moves with the price.
If you have gone long and the price goes up, the trailing stop will also move up. That way you’ll be able to maximize your profits, and you’ll be able to take advantage of the complete rise! Watch out, however, that you don’t set the trailing stop too tight. If you do so, the position might be closed too early while the rise still has to start.
Special Forex Orders
A Good ‘Till Cancelled (GTC) order remains active on the market unless you cancel it. The broker will never cancel the order, and you are responsible for monitoring it.
A Good for the Day (GFD) order will only last for the day in question. At the end of the trading day, the order is automatically removed if it has not been executed.
The One-cancels-the-other (OCO) order makes it possible to cancel order B when order A is executed or vice versa. This can be useful when you are not sure where the price is going, and you want to anticipate on both a potential downward and upward breakout.
The One-Triggers-the-Other (OTO) order is an order whereby the other orders are placed when this order is executed. In this way, for example, you can have certain stop orders placed after the position is opened.
These special Forex orders are not available at all brokers. For most Forex traders the standard orders are more than sufficient.
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