When you begin placing trading orders with forex brokers it is imperative that you know the methods to use. Your trading orders should be placed according to how you want to enter or exit a forex trade. If you fail to place the order correctly you may experience damaging losses due to incorrect entry and exit points.
Variations in forex brokers orders
1. The Stop Order
Stop orders become market orders once a particular price level has been attained. They are used to either enter a new trade or to exit an existing trade with forex brokers. A buy-stop order is when you purchase a pair at the current market price once it has reached the price you specified, or higher. A sell-stop order is when you give an instruction to get rid of your pair at the current market price once it has reached the price you specified, or lower.
Stop orders are often used when you trade breakouts. An example is if you trade EUR/USD and your pair is heading toward a level of resistance. Based on analysis that you have undertaken, you predict that if it goes above the resistance level, it will stay on an upward climb. To trade your prediction, you should place stop-buy order several pips above that level of resistance. This will enable you to trade the potential breakout. In the event that the price reaches or passes the price that you have specified, it will open your position long.
You can also use an entry stop order if you intend trading a breakout downside. You should place a stop-sell order several pips underneath your support level. When the price finally reaches the price you specified or if it goes below that price, you position will be opened short.
Before you enter a trade, you should know where you intend exiting that position in the event that the market turns against you. You can limit your losses by setting a stop-loss. An example is if you have a long position on EUR/USD, you will be hoping that the pair rises in value. To avoid possible losses, you should issue a stop-sell order at a specified price. This will close out that position automatically once that specified price has been reached. For a short position, you should set a stop-buy order.
If you have a profitable open trade, it is possible for you to move your stop-loss order in the direction that the profit is moving to protect some of the profit you have gained. In the case of a long position that is in a profitable position, you should change your stop-sell order from a loss position to your profit zone in order to protect against a potential loss if the trade does not reach the specified profit level and if the market turns against you. Likewise, for short trade that has turned to profit, you should move the stop-buy order from a loss to a profit zone. This will protect your profit that you are showing.
2. The Market Order
Market orders are the most common types of orders. It is used to execute an immediate order at the price currently on the market. This is either the ask price or the bid price as is displayed on your screen. You use market orders to enter a new trade or to exit an existing trade.