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Forex Order Types

By Jeffrey Cammack Published: October 16th, 2017 Updated: June 17th, 2019

A Forex order is an instruction from the trader to a broker that indicates the way a trader wants to enter or exit a trade. The most common orders types include:

  • Market Order
  • Stop Order
  • Limit Order

Market Order

A market order gives your broker the instruction to buy or to sell immediately, at the best available market price. The advantage of a market order is that it guarantees that the order will be executed.

The disadvantage of a market order is slippage.  Slippage is where in fast-moving markets, the price that the order eventually gets filled at may be different from the last price quoted before the trade executed.

AUDUSD Market Order Pepperstone

Market Order – Broker: Pepperstone, Platform: cTrader

When to use a Market Order?

Using a market order doesn’t guarantee a particular price, and so the only time this order type should be used is when you need a trade filled as soon as possible.

If you missed a breakout trading opportunity, and you see more evidence that the market will continue moving in the direction of the breakout ideally, you will want to use a market order. This way you’ll ensure you’ll be part of the new trend and profit from the move.

Limit Order

A limit order gives the broker the instruction to buy or sell at a specific price. The advantage of this order type is that it guarantees that your order will be filled only at a stipulated price.

Use a buy limit order is when the current market price is above the price one would like to buy at.  The limit order would then open a trade as the price falls to meet the price target and open the position.

Use a sell limit order is used to go short when the current market price is below the price the trader would like to sell at.  The sell limit order would open a position as soon as the price rises to meet the target price.

AUDUSD Limit Order

Limit Order –  Broker: Pepperstone, Platform: cTrader

Typically a limit order has also an expiration date attached to it. This means that your order will be live, and only be triggered before the expiration date. Your order will not be executed the limit price is not met for before the expiration of the order.

When to use a Limit Order?

If the AUDUSD is trading at 0.7650 and you want to buy on a retracement to 0.7600 use a buy limit order. Ideally, a limit order works best in a ranging market. If the price of AUDUSD was currently in a channel, and if you are going to buy at the support level and sell at the resistance level you could use a limit order as well.

Stop Order

A stop order gives your broker the instruction to buy or sell when the price is above or below the current market price. For example, if the AUDUSD is at 0.7800 and you want to buy it at 0.7850, then enter with a buy stop order.  Stop orders and limit orders are a great way to manage your trades if you want to look away to do research or move on to other tasks.

AUDUSD Stop Order Pepperstone

Stop Order – Broker: Pepperstone, Platform: cTrader

When to use a Stop Order?

Use stop order when you want to buy above resistance levels or sell below support levels. In other words, a stop order is great for breakout trading should you expect the market to break through a particular barrier.

If the AUDUSD is in a strong uptrend but facing some resistance you want to place a buy stop order in anticipation of the trend resuming and the resistance giving up:

Stop Orders are also called a stop-loss order. A stop-loss order is used to limit potential trade losses.

In a much broader sense, an order can be used to do two things:

  • Buy or going Long. If we go long, we’re expecting the currency pair to rise.
  • Sell or going Short. If we go short, we’re expecting the currency pair to fall.

Conclusion

Forex order gives the trader more control of how they open and close positions on the market.  Technical traders will have more success once they understand the different order types and how to use them.

When placing an order you first need to establish two things:

  • Am I trying to buy or to sell?
  • What price do I want my order to be executed at? This will determine the type of order you’ll want to use.

Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.