To trade in the forex (foreign exchange) market, you must place an order. There are various types of trading orders, but how do you know which order works best for you or your business? It’s a big decision, particularly for forex market beginners. Let’s take a look at these order types to find out more.
A market order is the most commonly used way of trading in the forex world. A market order is simply ordering to buy or sell at the best available price. This is an on-demand form of trading order where the order must be executed immediately by both the buyer and the seller.
It works similarly to how a customer would buy items online in one click. You see something, you like the price, and the next thing you know, it’s yours.
A limit order is all about the propositioner being in control. You set a specific price point at which you would want to either buy or sell a currency pair. You are giving instructions only to execute a trade if the market reaches the desired price or, in some cases, better. It sets either a maximum price you are willing to pay or a minimum price you are willing to sell at.
This is particularly useful as there is no need to keep a constant eye on the forex market. You can enter or exit a trade at a specific level and take advantage of price movements. Once a limit order is set, the market does the rest.
Stop Entry Order stops an order from taking place until it reaches a specific price point. This type of order is generally only used when you want to buy after the price rises to a certain point or sell when it lowers to a certain point.
Stop entry orders can only be used when the price becomes less favourable to you.
This type of trading order is designed to prevent additional losses if a price seems to be going against you. It is designed to protect you from losing trades and ensures that if the market moves against your favour, you can minimise your losses at a certain point.
Losses can happen in the forex market, so ensure you can limit your losses.
Trailing-stop orders are placed to track movements in the forex market to your advantage. It follows the price movement of a currency pair, providing you with a safety net that automatically adjusts in your favour.
This form of order allows for potential profit maximisation while still managing risk. You can secure profits during a trend and capture more gains depending on the fluctuation of the market.
These trading orders are the main types that most forex traders will ever need to use. To minimise risks and manage your trades, putting the most beneficial orders in place is essential. If in doubt, keep it simple and work your way up.
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