When you commence the execution of a trade in this market, it is termed as an order. You will come across various order types and they vary between brokers. All brokers normally cover the basic order types, but there are what some term as special orders that you should also know about.
Foreign Exchange Melbourne Orders
This type of foreign exchange Melbourne order is placed on the market and executed immediately at the best price available.
Limit Entry Order
This order is placed to purchase under the current price on the market or dispose of above the price currently in the market. If you find that the EUR/USD is trading at 1.3500 and you want to dispose of it when it goes to 1.3550, it is possible for you to place a limit sell order and as soon as the market reaches 1.3550, if will go short. This indicates that the limit sell order is done once the price has reached above the price it is currently standing at.
In the case where you want to purchase the EUR/USD at 1.3000, and it is trading at 1.3050, you can place a limit buy order for 1.3000 and as soon as the price reaches that level, your position will go long. This indicates that the limit buy order is normally placed under the level of the market price currently.
Stop Entry Order
This is placed to purchase above the price that is currently on the market or to sell below this price. An example is if you wanted to go long, but you wish to enter on a breakout of the resistance area, you could place your buy stop order slightly above the resistance and as soon as the price moves into your stop entry order level, your position would be filled. The converse is true if your intention is to sell.
Stop Loss Order
This is used to stop any further losses when the price goes beyond the level you specify. This is possibly the most important order type you should be aware of as it gives you the opportunity to control your risk levels and limit your losses. The order stays in effect until you liquidate your position or you change or cancel the order.
This type of order is connected to a position, similar to the normal stop loss. The difference is that the trailing stop moves the market price that is currently there as the trade starts to move in your favour. It is possible for you to set a trailing stop at a specified distance from the current price on the market. It will not commence the move until the price move is greater than the distance you have specified.
For example, you can set a 20 pip trailing stop on the EUR/USD pair. That stop will not budge until the position is favoured by 21 pips, and then it will move again when the market has moved 21 pips over where your trailing stop is placed. This allows you to lock in profits while the market is moving in your favour, but still allowing the trade to grow. This type of order is most suited to markets with strong trends.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS