Knowing the basics of Forex, it’s important to explain how Market Orders
Forex Market Orders
Knowing the basics of Forex, it’s important to explain how. For trading on Forex, it is necessary to get as close as possible to the interface that one or the other broker uses. Even though each of these trading systems often looks different, it’s mostly just design. However, the types of business orders you will use on a daily basis do not change. Let’s take a look at the most important ones:
Buy: Purchase order order is for immediate purchase of the currency
Sell: Sell market order serves for immediate sale of the currency
Pending orders and Limit orders
The limit order is used to buy currency pairs, for which we expect the price to return once again after reaching a certain price / limit. The Buy limit is therefore placed below the current market price, whereas the Sell limit is above the current market price. Using this feature, you set the price you are willing to pay or collect for a particular currency.
Example Buy Limit
The current USDJPY pair’s price is 112.00 and the analysis showed us that the price will gradually fall to 112.50, from which it will rise again. So, in Business Software, we specify Buy Limit at 112.50, so we buy at the same or better price than at the time the order was placed. The Sell Limit command works on the same basis, just as currency pairs are sold at higher values than current ones.
Stop orders differ from those limits by our market estimate. We will use the stop command when we expect the currency pair to break through a certain boundary and continue in the same direction. By using Buy Stop, we want to buy at the price we chose or higher because we expect the price to rise further.
Example Buy Stop
The current USDJPY pair’s pair price is 112.00 and the analysis showed us that the price of 112.50 will be further rising. So we enter Buy Stop at 112.50 into the trading software, so buy at the same or higher price than at the time of the order entry. The Sell Stop command works on the same basis, just selling currency pairs at lower values than current ones.
Is not the difference between Buy Stop and Buy Limit or Sell Stop and Sell Limit too clear.
Stop Loss (SL)
This command should be used automatically every time you purchase a currency pair. Stop Loss allows you to set the maximum loss of each investment. For example, if you buy a pair of EURUSD at the current price of 1.1165, you can set Stop Loss to 1.1200 to prevent more losses. However, it is important to note that Stop Loss can not prevent forex losses. It only limits them.
The Trailing Stop command is an excellent choice in combination with Stop Loss. Trailing Stop prevents a profitable investment from falling into a loss by keeping Stop Loss at a set distance from the current market price. This command, therefore, allows for an increase in the value of the investment while reducing the risk of loss.
Example Trailing Stop
Imagine that our investment is currently at 400 pips and we expect its value to continue to grow, but we want to prevent any loss. Trailing Stop is set to 200 pips, thus setting the maximum possible fall in investment. In addition, with the currency pair rising, the Trailing Stop is still kept at 200 pipels from the current price.
Take Profit (TP)
Take Profit is the opposite of Stop Loss. This is a command to set your maximum profit margin. When the currency pair price rises to this limit, the profit is automatically paid out. Just like Stop Loss and Take Profit, it’s a good idea to set up and protect your investment against unfavorable developments.