The term “order” refers to the manner in which a Forex trade will begin or end. In this article, we will look at the different types of orders that can be placed in the Forex currency market.
Make sure you know the different types of Forex orders that your online broker accepts. This can vary depending on each broker.
Types of Basic Orders
There are some basic Forex order types that all online brokers offer:
A market order is a buy or sell order at the current market price.
For example, let’s say EUR / USD is at 1.2140. If you want to buy at this exact price, you would click buy on the trading platform, which would instantly execute a buy order at that price. That is basically a market order, to buy a currency on the spot.
A limit order is an order placed to buy or sell at a specified price. The command contains two variables; the price and the duration.
For example, let’s say EUR / USD is trading at 1.2050. You want to go long, that is, to open a buy position in this currency pair but only if the price reaches 1.2070. You can stay in front of the computer and watch the price every moment until it reaches 1.2070 to execute a market order or, you can simply place a limit order at 1.2070. In the latter case, it will not be necessary to stay in front of the computer, since the trading platform will take care of executing your order the moment the price reaches 1.2070. You can specify at what price you want to sell or buy and you can also specify for how long the order will remain active (GTC or GFD that we will see a little further below).
Stop-Loss (Order to stop losses).
A stop loss is a limit order, but associated with a currently open trade. Its purpose is to prevent further losses if the price moves against you. Or they also serve to protect a certain level of profits made by a trade that is currently in profit.
Let’s say for example that you bought EUR / USD at 1.2230. To limit possible losses, a stop loss is placed at 1.2200. This means that if the price turns around and reaches the price of 1.2200 instead of rising, the platform would automatically execute a sell order at the price of 1.2200, and the position would be closed for a controlled loss of 30 pips.
Stop-losses are extremely useful if you don’t want to be sitting in front of the computer all day (something highly recommended from a psychological point of view to avoid stress and operate with anxiety or being prey to emotions). You can simply place a stop loss on any open position to be protected in case of an eventuality.
Other Types of Orders
There are other types of Forex orders that are not so common, but they are available in most brokers.
- GTC (Good ‘til canceled). A GTC order will remain active in the market until one decides to cancel it. The broker cannot cancel the order at any time. It is the investor’s responsibility to remember that there is an order of this type.
- GFD (Good for the day). An order of this type will remain active until the end of the current day. As the Forex market operates 24 hours, this generally means that at 9pm GTM (5pm EST), when the market in the United States closes, these types of orders will be canceled. However, this may vary from one broker to another.
- OCO (Order cancels other). An order of this type is a mix of two limit and stop-loss orders. If one runs, the other will be automatically canceled. Example: The price of EUR / USD is at 1.2040. You want to either buy at 1.2095 or buy at 1.1985. In this case, if the order executes the buy at 1.2095, the sell order at 1.1985 will automatically be canceled.
Always remember to know specific information about the types of orders handled by the online broker you are using.