Forex Order Types: Limit orders and Order Types

If you decide to enter the world of forex trading with the guidance of a fully regulated, qualified trader, then there are several different types of orders that they could choose to control and make your trades, dependent on your individual circumstances. The type of order that they choose will typically be dependent on their individual forex trading style.

Here we take a closer look at the different forex order types.

Market Orders

– Also referred to as execution orders, market orders are priced using the existing spot in the market and they are executed instantly.

– As soon as the market order has been opened in the market it will face fluctuations based on the day’s events.

– Should the rate go against you, it means you would be hit with an unrealised loss. As such, if the trader chose to close at this position then the loss would be realised and the account would then be adjusted to reflect the loss.

Limit Orders

– The idea of limit orders is that they establish that a currency will be bought or sold when certain conditions are reached.

– Each order is considered pending, and does not affect totals or calculations, until the conditions are met.

– Generally, limit orders in the forex market are used to make sure that orders are executed instantly when a price hits a pre-established level. So if the trader is confident that a currency pair will move in the near future then it could place a limit order to ensure that if the rate moves then your buy will be secured without having to take any additional action.

Take-profit orders

– If the trader thinks that a currency is unlikely to move above a certain level, then a take-profit order can be used to close an open order automatically as soon as a specific marker is reached.

– Usually, take-profit orders are used by those who want to ensure that their profits will be sustained even when they are unable to monitor the market.

– Trades will always be closed at the established market rate.

Stop-loss orders

– Seen as a defensive tool, a stop loss order will help traders avoid losses.

– The idea behind a stop-loss order is that a position will be closed when the market starts to move against you. Professional traders set the stop-loss order at a certain level and it will close as soon as the market reaches that point.

– Often referred to as a type of account insurance, stop-loss orders will not be able to stop you from suffering losses but instead they have been designed to limit their risk.

– With stop-loss orders, trades are closed at the present market rate.

Trailing stop orders

– Working in a similar manner to a stop-loss order, a trailing stop order is meant to restrict the chances of making a loss; while also avoiding margin close-outs.

– With a trailing stop order, trades are closed whenever the forex market moves in a direction that is deemed to be unfavourable by a pre-determined distance.

– What makes a trailing stop order different is that on occasions when the market moves in a direction that is favourable, it will continue to follow the market price at a specified distance. So with this in mind you will be able to enjoy valuable gains while also restricting potential losses.

– On occasions when a long position is formed, trigger prices move forwards. However, when the market falls, the trigger price will remain the same. On occasions when you are holding a short position, it will move down when the market falls – but will remain at the same level whenever the market moves forwards.

Remember that forex order types are no guarantee of success in the forex markets and will only be employed dependent on your individual circumstances and the approach of your professional trader. If you want to increase your chances of enjoying favourable gains then you could seek guidance from Unite’s partner, a major investment boutique based in London. It will help to manage your money while guiding you through the forex trading markets.

PLEASE NOTE: These guides are meant to offer a general outline of some key forex-related areas. They are not to be constituted as financial advice and the strategies should only be considered by professional traders in selected circumstances. If you are considering entering the forex trading markets, seek independent financial advice first.