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A Guide To Forex Order Types

Forex markets require some degree of automation since they operate round the clock. It implies that the value of your investment would keep changing 24/7 on the basis of how the market moves in different time zones. Therefore, in case there is an open position that has not been dealt with for a couple of days, its financial value could dramatically change.  Additionally, it is not practical for one to be able to maintain these positions 24/7 on their own unless you happen to own a corporate firm and can afford people to do it for you. Hence, in a case like this market orders are your best friends. These tools can be very useful for investors and traders in the forex market as it allows them to passively manage their open positions.

Such tools help investors in making sure that their dubai trade values stay well within particular limits irrespective of the market movements. Before diving into the world of trading, you should be well-verse with a set of forex orders you must be familiar with and be comfortable using them to have a smooth trading experience. Term orders in forex indicate the way you would connect with your broker and instruct them to open or close an order on your behalf. Do remember that we’ve now come a long way from calling your broker to execute the trades. You can do it on your own in just a few clicks and the orders would be place.

Types of market orders

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You will come across various types of forex orders that traders use to manage and carry out their trades. Though these could be different for different brokers, the following are some basic order types that all brokers accept:

  • Market Order
  • Limit Order
  • Take profit Order
  • Trailing stop Order
  • Stop-Loss Order

Market order

A market order indicates the order you place with your online forex broker to open or close a trade at the best available price, at a particular time. In a market that changes rapidly, there could be a difference between the price when the market order is place and the actual price.  As a result, such an order type could contribute to a loss or gain of several pips. Ensure that your strategy is on point and that the market conditions are apt for when you process this order with your broker.

Limit order

The limit order indicates the order you give to your broker to carry out a transaction (buy or sell) specifically at a certain price (the limit) or at something better but not lower than that. It can be a good strategy to buy currencies with rates under the market price or sell currencies above the market price. The ultimate aim of such an order is to cut down the risk of a sudden price fluctuation, so it could be use in your risk management system.

Take profit order

The take profit order indicates an order you give to your forex broker to come out of the market and close the trade automatically when it reaches a particular point in the expected direction. Since prices can reverse unexpectedly, you should keep a take profit value in place to take the profit automatically before the market reverses the gains. Such an order is typically used in sync with the stop-loss one. The ratio of the amount of taking profit pips against the number of stop-loss pips is referred to as the risk-to-reward ratio.

Trailing stop order

Contrary to the take-profit order, the trailing stop order, also called the profit-protecting stop order, indicates the order you give to your forex broker to buy or sell if the currency rate seems to be moving in an unfavorable direction. It resembles the stop-loss order, but the key difference is that the trailing stop along with the price– allows one to make a profit and cut down loss if the trade does not turn out to be a good one.

Stop-loss order

A stop-loss order is an order that you place with your online broker to come out of a trade once you have arrived at a certain price. It has been create to cut down your loss of capital in a single trade. This is a necessary order in the forex market. Certain traders are apprehensive of using these as they are concern about being stopped only to see the market changing its course.

For some others, it does not match their trading strategy. However, before taking into consideration the opportunity, forex traders need to take the risk into account. A stop-loss order keeps your trade safe from major capital loss and rules out any chance of trading while you’re emotionally charge.

Importance of using Forex orders

Irrespective of your preparation and the adequacy of your trading plan or strategy, the forex market can surprise you anytime. You must also choose your broker with caution since all of them would not allow you to place these orders.

Forex trading is definitely risky but the opportunities for profit are also plenty. Use these major forex orders and you would be able to keep a check on the unpredictable factors as well. Even if you are taking all the measures to keep your trades safe, you can never rule out the risks.

Key Takeaways

In our final words, we’d say that you must be well-verse with various types of forex orders and learn how to use them in your forex trading strategy. Do not underestimate how useful stop losses are in Forex trading in stocks, particularly if you do not wish to monitor your trades all the time and anxiously stay glued to your screen. During a certain point in time, you would find yourself using stop-loss orders when market news is out so you can cut down the risk of being exposed to unpredictable market moves.

As you progress in your trading journey, you will be able to use more ‘sophisticated’ forex limits and stop orders. Some of them could be the trailing stop order and the take profit order.