What can you order in FOREX market?! Actually the word order refers to the way to enter or exit a particular trade. There is a large diversity of types of orders and here we will cover most of them.
Market Order: an order to buy or sell at the current market price. It means that you click on the buy or sell button after having specified your deal size. You like the current price, you click once and the trade is done! The order is processed instantly, which means that you get the price shown exactly when you have clicked. No surprises!!
Limited Order: an order placed to buy or sell at a certain price. The order essentially contains two variables, price and duration. Let's say that the current trading price for EUR/USD is 1.2050. However, you won't think about trading until it is 1.2070. One option is to wait in front of the monitor for the desired price and once it is 1.2070 you click a buy market order. Another less time consuming option is to set a buy limit order at 1.2070. Once this is done you can walk away from your computer, take a shower (or even a bubble bath), take your dog for a walk, meet your friends for breakfast, lunch or dinner and even watch all the replays of "American Idol"! The trick is that if the price goes up to 1.2070, your trading platform will AUTOMATICALLY perform a buy order at that price! Don't you just love when things are done for you?! There are two categories of limited order you should get familiar with. Here they are:
· GTC (Good till cancelled): A GTC order remains active in the market until you decide to cancel it. Your FOREX broker will not cancel the order at any time. This means you are responsible for it.
· GFD (Good for the day): A GFD order remains active in the market until the end of the trading day. Since foreign exchange is an ongoing market the end of day must be a set hour.
Stop-Loss Order : also an order placed to buy or sell at a certain price. The order contains the same two variables, price and duration. Stop-loss order is similar to limit order. The only difference is that stop-loss order prevents additional losses if price goes against you. A stop-loss order remains active until the position is liquidated or you cancel the stop-loss order.
For example, you bought EUR/USD at 1.2230. You don't want to lose too much in case things go wrong. So you set a stop-loss order at 1.2200, meaning that if your predictions are wrong and EUR/USD drops to 1.2200 instead of going up and making you profits (NO!!!) your trading platform would AUTOMATICALLY execute a sell order at 1.2200 and close your position out for a 30 pip loss (hmmm…).
Why is this useful? Well, let's just say that you don't want to sit in front of your computer day and night hungry, depressed and smelly; worrying that if you move an inch from the monitor you will lose all your money. With stop-loss order things are taken care automatically for you. This way you can apply your strategies and make money while having a picnic with your family at the back yard. We have to add another set of letters for you to remember:
- OCO (Order cancels other): An OCO order is a mixture of two limit and/or stop-loss orders. Two orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other order is canceled.
For example, let's say that the price of EUR/USD is 1.2040. You cannot figure out at the moment how things might turn out, but you don't want to miss on anything. OCO is the way to get two rabbits with one shot. Let's say that you want either buy at 1.2095 or sell if the price falls below 1.1985. This means that if the price goes up to 1.2095 your buy order will be executed and the 1.1985 sell order will be automatically cancelled!
The bottom line is to make things as simple as possible. Always check your broker's policies on each order type. Every broker has its own rules so make sure you know them all.