Introduction to Order Types

Introduction to forex order types? Orders are critical tools for any type of trader and should always be viewed when executing against a trading strategy. Orders can be used to enter right into a trade along with, help protect profits and limit downside risk. Understanding the differences between the order types available can assist you to determine which orders best suit your requirements and are best suitable for help you to reach your trading goals.

Limit

A control order (also referred to as a “take profit” order) can be an order to purchase or sell at a specified price or better. A sell limit order is filled at the specified price or maybe more; buy limit orders are executed at the specified price or lower. Limit orders allow you the flexibleness to be very precise in defining the entry or exit point of a trade. Bear in mind that limit orders do not guarantee you will enter into or exit a posture, because if the specified price isn't met, you order won't be executed. A control order that's attached to a currently existing open position (or a pending entry order) with the goal of closing that position are often referred to as a "take profit" order.

Stop

An end order triggers a market order when a predefined rate is reached. A purchase stop order triggers a market order once the offer price is met; a sell stop order triggers a market order once the bid price is met. Both stop orders are executed at the very best available price, according to available liquidity. Stop orders, also known as stop loss orders, really are a frequently used to limit downside risk. Stop orders help to validate the direction of industry before entering right into a trade. It's crucial that you keep in mind, that stop orders are executed at the very best available price after industry order is triggered, according to available liquidity.

Trailing Stop

A trailing stop is really a stop order that's set predicated on a predefined amount of pips from the existing market price. A trailing stop will automatically trail your position as industry moves in your favor. If industry moves against you by the predefined amount of pips, a market order is triggered and the stop order is executed at another available rate according to liquidity.

Contingent Orders

Contingent orders combine several types of orders and are used to execute against a specific trading strategy. Contingent orders require that one of the orders is triggered, before another order becomes activated. The most common types on contingent orders are If/Then and If/Then OCO.

If/Then

An if/then order is a set of two orders with the stipulation that if the first order (known as the "if" order) is executed, the second order (the "then" order) becomes a dynamic, unassociated, single order. Unassociated orders are not attached to a trade and act independently of any position updates. In cases when the “if” order does not execute, the “then” single order will remain dormant and won't be executed when industry reaches the specified rate. Note that whenever either part of an if/then order is cancelled, all parts of the order are cancelled as well.

If/Then OCO

An if/then OCO provides that if the first order (the "if" order) is executed, the second order (the "then" order) becomes a dynamic unassociated one-cancels-other (OCO) order. Remember, unassociated orders are not attached to a trade and act independently of any position updates. Just like a typical OCO order, the execution of either one of the two "then" orders automatically cancels the other. In cases when the “if” single order does not execute, the "then" OCO order will remain dormant and won't be executed when industry reaches the specified rate. When any part of an if/then OCO order is cancelled (including either leg of the OCO order), other parts of the order are cancelled as well.