Hey traders,
In this post, we will discuss types of orders that we use in Forex trading.
➖ Market order.
Trading position is opened at a current price level.
Buying the asset, you will open a trading position at a current ask price.
Selling the asset, you will open a trading position at a current bid price.
Even though market order is the most preferable type of orders among newbie traders, I highly recommend not to use that, especially if you are a day trader.
❗️The main problem is that prices constantly fluctuate and there is a certain delay between order execution and position opening. For these reasons, the position will be opened from a random price level within the range where the market is currently staying, affecting a risk to reward ratio.
➖ Limit order.
Trading position will be opened only from a desired price level.
With buy limit, you will buy the asset from a certain level.
(current price remains above the order)
With buy stop order, you will buy the asset from a certain level.
(current price remains below the order)
With sell limit, you will sell the asset from a certain level.
(current price remains below the order)
With sell stop, you will sell the asset from a certain level.
(current price remains above the order)
I prefer to trade with limit orders. Limit order helps you to trade from a desirable level, automatically executing the order once it is reached, letting you preliminary set it.
❗️However, remember that there is one big disadvantage of that order type: there is no guarantee that the price will reach the desired price level to activate a trading position. For that reason, occasionally you will miss the trades.
Setting a sell limit order on Gold on 2049 level, the trade would be missed because the price respected 2048 level and dropped immediately then.
Try these order types on a demo account to learn how they work in practice.
Which order type do you prefer?
