Understanding the Full Set of Trading Orders
Selecting and placing the right trading orders can really make the difference when trading manually any financial market.
Why a Full Set of Trading Orders Matters?
The variety of trading orders offered by our modern platforms is very helpful in covering all trading needs. These are some key advantages of using a full set of trading orders:
→ Apply effective money management
→ Adapt to any market conditions (limit orders)
→ Minimize the loss potential and protect account (stop-loss orders)
→ Run and protect profits (trailing take-profit orders)
→ Time trades (GTC, GFD orders)
→ Trade short-term price fluctuations (from entry to exit)
→ Implement multidimensional strategies (OCO orders)
Trading Order Types
These are the main types of trading orders when trading Forex, CFDs, and Futures.
(i) Market Orders
A market order (Buy/Sell) is filled at the current market price (Bid/Ask). Actually, a market order includes only one variable, quantity. The advantage of this order type is that the execution is instantaneous.
Tip:
Avoid placing market orders in non-liquid markets, and especially, if you are placing those orders before the market opening. In addition, at times of key news releases, traders should be very careful in placing market orders, especially if their broker uses a Dealing Desk (Market Maker). During news releases, the spread between ask/bid gets significantly wider, and the slippage, added by market makers, makes execution even more costly.
Why is a Market Order Important?
A market order is gets filled instantly, and that is crucial for event-traders such as news-traders.
(ii) Limit Orders
A limit order (Buy/Sell) will be filled at a certain price, a price that is pre-determined by the trader. A limit order includes two (2) more variables than a market order: price and duration. Traders can specify the duration that his limit order will remain active.
Why is a Limit Order Important?
A limit-order offers extended control and safety to all trading styles.
(iii) Stop-Orders
(a) Stop-Loss Orders
A stop-loss order is placed at a certain price and if that price is reached then the position is closing automatically. A stop-loss order aims to limit the loss potential of a trading position.
Tip:
Be aware that after the market closes (Friday midnight for currencies) a stop-loss may prove incapable of protecting your account. Very often, the market re-opens with a price gap and that means a stop-loss cannot guarantee the extent of a loss.
(b) Take-Profit Orders
A take-profit order is placed at a certain price and if that price is reached then the position is closing automatically. A take-profit order aims to guarantee the profit potential of a trading position. Advanced traders usually enter trailing take-profit orders.
(iv) Trailing-Stop Orders
A trailing stop order is an adjustable stop-order that closes a trading position if the market moves in an unfavorable direction. Trailing stop-orders can adjust to any market conditions, providing more flexibility than simple stop-orders. Actually, traders can set a trailing-stop order at a fixed number of pips from their entry rate (for example 7 or 9 pips). The trailing stop will adjust automatically as the market moves up or down.
Why is a Trailing-Stop Order Important?
This order type offers extended flexibility as concerns profit maximization and risk limitation.
(v) GTC Orders (Good Till Cancelled)
This trading order type will remain active until the trader decides to cancel it. Therefore, the GTC order, will either be filled by the market or canceled by the trader.
Why is a GTC Order Important?
It can save time, especially as concerns traders who are entering the same orders every morning.
(vi) GFD Orders (Good For the Day)
A GFD order will remain active until the end of the trading day. Forex is a 24-hour market, therefore, the end of the day is determined by the broker’s server time. For UK-based brokers, the end of the day is at 00.00 GMT, and for Cyprus-based brokers, the end of the day is at 00.00 GMT+2.
(vii) OCO (Order Cancels Other)
An OCO order is a combination of two (2) different orders. When one of these two trading orders is filled, the other order is canceled automatically.
Why is an OCO Order Important?
The OCO orders are placed above and below the current market level and offer the chance for implementing multi-dimensional trading strategies. For example, if the price has reached a key support/resistance level, an OCO order can trade the possibility of a price breakout, and at the same time the possibility of a price reversal.
□ Types of Trading Orders
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