Hello, welcome to another lesson on our forex educational series . If you are not following us up, then I suggest you start from the part one of this lesson to further understand how the forex market operate or you can go straight to either our forex article or forex strategies to read more about the forex market.
In this lesson, we will be discussing a bit about “orders” associated with the forex market.
I will suggest you people visit that link above if you want to know the basic types of orders in the financial market.
What are orders?
Just like going into a restaurant and ordering for your food, same happens with the forex market except in this case we are not ordering for a meal or drink but rather, instructing our broker to place a trade for us on our behalf.
Orders are sub-divided into two, which are the Instant Execution and the Market Execution
The instant execution means that your order will instantly be executed or filled with the price you are seeing on your trading platform unless you have a bad internet connection.
While the market execution means that, your order will, get filled up with the available market price, which might be different with what you are seeing on your trading platform, and we call this price variance SLIPPAGE.
These (instant and market execution) are one of the ways to spot a Market Maker Broker and an Electronic Communication Network(ECN) broker or Straight Through Processing (STP)Broker.
What are Pending Orders?
Pending orders are used when you do not want to place a trade using the available (market) price, meaning that you want to wait for the price to meet your trading criteria or strategy.
Pending order are divided into LIMIT ORDER and STOP ORDERS, where limit orders are further categorized into buy limit order and sell limit order while the stop order is sub-dived into buy stop and sell stop.
We are not going into much detail about the types of orders as they have been explained in this article Understanding the Type of Order in Forex.
The two most used orders in forex are the Market Orders, along with Stop Loss and Take Profit.
Stop Loss and Take Profit are also types of orders in the forex market.
Let me explain, our profit or loss is someone else’s loss or profit, so you placed a Buy Order with a Stop Loss and it turns out to hit your Stop Loss, automatically your Stop Loss becomes a Sell Order the same logic applies to Take Profit –they are used to cancel your order thus sending your order back to the market.
Various Orders Type
Apart from the above orders we have some other types of others which are GTC (Good Till Cancelled), GFD (Good For the Day) OCO (Order Cancels the Other).
GTC (Good Till Cancelled) does not place any order on the forex market but rather are used to cancel a Pending Order from been executed in the market. Note that Only the Trader has the responsibility of cancelling a pending order and not Your Broker
GFD (Good For the Day), unlike the GTC, the GTF only keeps a pending order active in the market for only a day so by the end of the trading day, it becomes cancelled automatically. Check with your broker to know what time zone there server is on to be able to identify when they will close for a financial day.
OCO (Order Cancels the Other), though only a few broker offers this kind of order but this orders comprises of two pending orders where when one is triggered then the order is cancelled. This order is suitable for scalpers who trade during high volatility hours, ask your broker if they offer this kind of order.
In summary, forex trader should have the theoretical knowledge about the orders in forex and how they work, so I urge everyone to read this carefully with comprehension.
If you have any question you can either contact me or comment below, I would love to hear from you.