Instant Orders Vs Pending Orders in FX Trading
One of the first things you’ll need to learn about FX trading is the difference between instant orders and pending orders. You may need to initiate either of these types of order throughout your trading life, whether you’re trading independently or following forex signals.
BUY STOP = Order placed ABOVE price and keeps going UP
BUY LIMIT = Order placed BELOW price and price then goes up
SELL STOP = Order placed BELOW price and price keeps going DOWN
SELL LIMIT = Order placed ABOVE price and then goes DOWN
With instant orders, it’s always a good idea to have a stop loss in place; there are even traders who do not set take profits that will usually have either a stop loss or trailing stop. This is because the market can shift faster than the trader can react.
On the popular MetaTrader 4 platform for instance, pending orders are initiated in nearly the same way as instant, they simply have additional requirements written in when defining the trade.
Here are a few definitions that you should know when dealing with pending orders:
- Good til cancel. A GTC order is any standing order that has conditionals, for instance a specific ask price. The GTC order will remain pending until that condition is met — and that condition may never be met. A GTC order’s benefits is that it’s highly specific: you’ll buy or sell the currency pair exactly when your conditions are right. It can be dangerous however because it will remain outstanding; a trader needs to do account management and be aware of their GTC trades so that they don’t risk accidentally overextending themselves.
- Stop orders. A stop order is a buy or sell trade that will initiate once the currency pair has reached its stop price. Stop orders are generally placed a certain amount away from the current market price so that the trader can pick up their trade at a specific point. Stop orders are a type of GTC trade as they will exist in pending until the stop price has been reached.
- Limit orders. A limit order is a buy or sell trade that initiates once the currency pair has reached its limit price; it is essentially the opposite of stop orders. Limit orders will operate as GTC trades until the limit price has been reached. Some traders have strategies for positioning limit prices and stop orders so that they can capture slightly more profit each trade.
- Using forex signals
- Take profit. A take profit is when the trade should actually capture profit. It is the price that the currency pair will need to reach for the trade to close. Setting a take profit is essential to many strategies; it ensures that the trader will not miss an opportunity (as the market does move quite fast) and it will make sure that they stick to their strategy. Without a set take profit, a trader may instead be tempted to let a trade ride in order to capture even more profit; this could result in the trade losing money instead.
- What is the Forex Market?
- Stop loss. A stop loss is the counterpart to a take profit. A stop loss stops the trade once the market price has fallen to a certain amount.
- Trailing stop losses. A trailing stop loss is used in some advanced FX trading strategies and may be used in lieu of a take profit and a stop loss. A trailing stop loss that is set too close to market price can be dangerous, especially in times of volatility; it will close the trade quickly. Stop Loss
- MANAGE YOUR TRADES, MONEY & RISK
- Instant Orders Vs Pending Orders
- Re-quoting. This can happen for a variety of reasons: the volume may not be available or the price may have simply changed.
- What is Leverage and How Does it Work?
Which Type of Forex Order is for me?
Deciding whether to initiate a pending order or an instant order will depend on the trading strategy that you are using. Some traders initiate only instant orders because they are trading live; they are watching the market signals actively and deciding when they should buy or sell.
While this is legitimate, it also requires a lot of attention and work; the trader simply cannot look away because the forex market operates too quickly. On the other hand, pending orders give a trader flexibility, the capability to strategize, and to plan their trading activity more accurately. Foreign Exchange Forex FX
So, to round up…
Pending trade orders are what you should use if you want to initiate trades based on specific market prices. If you are using forex signals, looking to implement a trading strategy, this is the way to go. Introduction to Order Types
Choosing a type of forex order will depend on your own trading strategy, your risk tolerance, and ability to monitor the market.