Order Types in the FOREX market
A trader has at his disposal different types of orders to make FOREX trades.
A clear understanding of each type of order is necessary to be a successful trader.
Three of these are future orders, to help him manage his money well, and prevent un-necessary losses.
Market Order - is an order to buy or sell at the current market price. They can be used to enter or exit a trade.
Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction.
This is due to slippage - the amount the market moves in the few seconds between giving an order and having it executed.
Slippage could result in a loss or gain of several pips.
Limit Order - is an order to buy or sell at a certain limit.
They can be used to buy FOREX currency below the market price or sell currency above the market price.
When buying, your order is executed when the market falls to your limit order price.
When selling, your order is executed when the market rises to your limit order price.
There is no slippage with limit orders.
Stop Order - is an order to buy above the market or to sell below the market.
They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected.
A stop-loss order will sell the currency if the FOREX market falls below the point set by the trader.
