Understanding the Types of Orders in Forex

To make profit from the forex trading, we need to instruct our broker to place trades on our behalf into the Forex Market, and we can do this by placing ORDERS through our brokers.

I will explain what these orders are, and the types of orders that are available for forex traders.

What are Orders in Forex Trading?

market orderWell, the word “order” in reference to forex trading, is used to refer to how a trader will enter and exit a trade. Most time you hear traders say “I placed a sell or buy order”. This is simply saying that you (the trader) have instructed the broker to either open a sell or buy position in the forex market on your behalf.

Now that we have understood what the word “order” means, we will now proceed to look into various types of orders related to the Foreign Exchange Market.

There are two (2) types of these orders, which are

  • Market Order
  • Pending Order

NOTE: there are various types of order in the forex market, be sure to know which your broker accept.


CHECK OUT: Reasons To Trade Forex Than Other Market

Types of Orders

market order

Market Order

The popular kind of order is the Market Order; I am very certain that almost everyone knows at least about this or have heard about it at least once. If you haven’t, do not worry as this article is about the various types of orders we have in forex trading.

A Market Order is an order to BUY or SELL at the CURRENT MARKET PRICE. Let us take for example EURUSD is currently trading at 1.10310 and you want to enter a BUY or SELL at this price, you just simply have to click the BUY or SELL button on your trading platform and your broker [server]will immediately fill [place] that trade for you with the best available price.

Market Orders are sometimes called Market Execution and are a bit different from Instant Execution. Read to the bottom of this article to understand the difference between this two.

Pending Order

Another type of order is the pending order, just as the name suggests these are orders that are literally just “pending”. They are on the broker [server] waiting to be sent to the market – so there are just pending.

Types of Pending Orders

There are various types of pending order, which include:

  • Limit order
  • Stop order

market order

Limit order

A Limit Order is an order placed from the trader to the broker to buy or sell at a specific price or at a better price but not on the current market price.

Type of limit order

The limit order comprises of:

  • Buy Limit Order
  • Sell Limit Order

The Buy Limit Order is a type of order where a trader instructs his broker to place a Buy Order if the price of a currency pair should fall below to the trader’s intended price.

An example will be, if the current market price of USDCHF is 0.76958 and a trader thinks it is overvalued and foreseen it so fall by 200 pips, so that he can buy it cheap. That trader will need to place a Buy Limit Order at 0.74958 – so technically the trader is placing a Buy Order below the market price.


READ: How money is made trading the forex market


Sell Limit Order

The Sell Limit Order is also another type of order similar to the buy limit order except that a sell limit order is given to the broker to sell a currency pair if the price of the currency rises further from the current market price.

Using the example from the one above, if the trader decides to place a Sell Limit order on USDCHF; the trader will have to wait for the price of USDCHF to go long to his desired target price before placing a Sell Limit.

Limit Orders are great, as you do not have to enter a trade immediately but wait for it to come to your desired level and is best used when you are not always available to look at the chart.

Stop Order

Stop Orders are totally different from Limit Order, on how they are placed. Stop orders are orders sent to the broker to buy above the currency price or to sell below the current price whereas, Limit Order are placed to buy below the market price or sell above the market price.

Types of stop order:

  • Buy stop Order
  • Sell stop Order

A Buy Stop Order is a type of order, where a trader will instruct a broker to open a buy trade above the current market price.

A Sell Stop Order is a type of order, where a trader will instruct a broker to open a sell trade below the current market price.

For example, if a trader expects the price of EURUSD to go long and continue going up, we can place a buy stop order to enter into the trade after EURUSD has gone in our direction (long) for some amount of pips and vice visa for a sell stop order.

These types of orders are used when we need to be certain that we are in the right direction in a trade and are suitable for some strategies.


Other Types of Order

The orders above are types of Pending Order, but we still have other types of orders such as:

  • Stop-Loss Order
  • Take Profit Order
  • GTC (Good Till Cancelled)
  • GFD (Good For the Day)
  • OCO (Order Cancels the Other)

Stop-Loss Order

We all know stop‐loss are literally used to Stop Loss from exceeding the trader’s threshold when trading. We will explain these in a more detailed manner.

market orderStop Loss Order is an order linked to an open trade for the purpose of preventing additional losses if price should go against you. A stop‐loss order remains active until the position is filled or you cancel the stop‐loss order by yourself.

For example, you went long on EURUSD at 1.22130. To limit your loss, you set a stop‐loss order at 1.22100. This means if you were wrong and EURUSD drops to 1.22100, your broker’s server would automatically execute a Sell Order on your Buy Order at 1.22100 and close out your position for a 30 pip loss.

Stop Losses are extremely useful if you do not want to sit in front of your computer or hold your smart phone all day, worrying about your open position in the market. You can simply set a Stop Loss order on any open position.


CHECK OUT:  What Is Margin Call Regarding Forex Trading

Take Profit Order

Take Profit Order are just the opposite of Stop Loss Order. Stop Loss Order is just to lock your profit, let us say you went short on a currency pair and it went in your favour and you do not know how long it will keep going in your favour. You can set a Take Profit Order to immediately close your profit when your targeted price is reached.

There are also other kinds of orders, which most traders DO NOT have a clue about but always see them in their trading platform and we will look into these orders in this article.

GTC (Good Till Cancelled)

A GTC can be seen when placing a pending order; a GTC order remains active in the market until you decide to cancel it. Your broker will not cancel the order without your intervention or permission.

This is what a GTC (Good Till Cancelled) does, let’s say you placed a buy stop order and you want that order to remain active in the market until we close it manually using the GTC, is the best order to use.

GFD (Good for the day)

A GFD order is a little different from the GFD (Good Till Cancelled). The GFD remains active in the market until the end of the trading day. Because the Foreign Exchange Market is a 24‐hour market, this usually means 5pm EST or 10pm GMT +1. Since that is when the New York Market closes, but I will recommend you that, you find out the time zone your broker is using or simply read about When Can You Trade the Forex Market..

OCO (Order cancels other)

An OCO order is a mixture of two limit and/or stop‐loss orders. Two orders with price and duration variables are placed above and below the current price. When one of the orders is executed, the other order is cancelled.

Example, the price of EURUSD is 1.20400. You want to either buy at 1.20450 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls below 1.20300.

market orderThe understanding is that if 1.20450 is reached, you will buy order will be triggered and the 1.2030 Sell Order will be automatically cancelled.

Always check with your broker to know if they offer such as Order Type, you can visit our Broker’s Page to review different types of brokers.

We have all seen that there are direct types of orders available for traders to choose from. But unfortunately only a few such as Take profit, Stop loss and Market Orders are used, well this may be because those are what most traders will ever need while trading.

When using most trading platform such as Meta Trader, you would see an option for instant Execution. This is mainly offered by brokers who are market makers or those whose account type is not ECN or STP.

What this (Instant Execution) does is, when a trade is open, it immediately opens that trade for you instantly at that price. This is because the order will not be sent to the market but rather is done in an in-house trading.

CHECK: How I Overcame The Fear Of Losing In Forex Trading

Whereas the Market Order is sometimes called Market Execution  and is used to show that the account type is an ECN and your order is being sent directly to the market without any interference.

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