Lesson 5: Market Orders
A market order is an order to buy or sell at the best available price. It is one click order. You click on the price you want to buy/sell and it’s done. It is the same like you are shopping on eBay! It’s kind of like using the oneclick ordering when you like the current price, you click once and the item is yours!
Limit Entry Order
A limit entry order is an order placed to either buy below the market or sell above the market, at a certain price. These are used when traders want to enter the market in a value area. For example, if it looks like the market is going to retrace lower from highs before moving higher again, a trader might use a limit entry order to buy below the current price. That way, when the market retraces, he/she can get long for the push higher.
A stop-entry order is an order placed to buy above the market or sell below the market, at a certain price. These are typically used in breakout plays. Traders will wait for a currency to break through a level before entering in the direction of the breakout, and place a stop-entry order at the breakout level to get into the trade as soon as it breaks out.
Stop loss orders are useful for traders who are not willing to sit in front of their monitor all day in order to stop the trade if it goes against them. A stop loss order is a type of order linked to a trade for the purpose of preventing additional losses if price goes against expectations. A stop loss order remains in effect until the position is liquidated or it can be cancelled by the trader. For example, you went long on EUR/USD at 1.1220. To limit your maximum loss, you set a stop-loss order at 1.1200. This means if you were wrong and EUR/USD drops to 1.1200 instead of moving up, your trading platform would automatically execute a sell order at 1.1200 the best available price and close out your position for a 20-pip loss.
Take Profit Order
Take Profit order is exactly the opposite of a stop loss order. It automatically closes a trader’s position once a pre-set profit has been made. Let’s assume that you are sure that EUR/USD will go up to 1.2000 and then start dropping again, you want to place a close order at that price in order to make the maximum possible profit. But suddenly your girlfriend calls and she want to take her out tonight. So you place a take profit order and you leave with no worries of losing the pick!
A trailing stop is a type of stop loss order that moves as price fluctuates. For example, let’s assume going short USD/JPY at 89.90, with a trailing stop of 30 pips. This means that the stop loss is at 90.20. If the price goes down and hits 89.60, the trailing stop would move down to 90.90. The stop won’t widen if market goes higher against the trade. Once the market price hits the trailing stop price, a market order to close the position at the best available price will be sent.
Good till Cancelled
That’s indeed as simple as is heard; a GTC order remains active in the market until the trader decides to cancel it.
Good for the day
A GFD order remains active until the end of the trading day. If you wonder “What end of trading date? Didn’t you tell me before that there’s not an end until Friday?”, then you really got the point! As forex is a 24-hour market, this usually means 5:00 pm EST (the time U.S. markets close) but some brokers may have another “end” for their trading days so we advise you to check it out.