When viewed in general, most novice traders only know Market Orders and Pending Orders. However, there are actually quite a lot of types of orders in forex trading.
Similar to the meaning of ‘order’ in a restaurant; In Forex trading, the word order implies how we want to ‘order’ something, exactly what to order, and want to order now or later.
Whether to Buy/Sell at what price, how the trading position will be closed, and so on. Everyone can determine different methods of determining how to open and close positions, so that there are various types of orders in forex trading.
In general, traders only know Market Orders and Pending Orders. However, if discussed in detail, there are actually many types of orders in forex trading. Here’s the full discussion.
1. Market Order
This is the simplest type of order in forex trading. Market Order is a type of Buy/Sell order at the best price available in the market. For example, the price on USD/JPY is currently at 109,838.
If we want to Buy USD/JPY at the market price, then it will be ‘sold’ to us at 109,852 (Ask Price).
We will click ‘buy’ on the trading platform, and the platform will immediately execute a buy order at that price. The actual picture can be seen in the image below:
Pay attention to the current price position (109,838) which is on a moss green background, as well as the Buy price at 109,852 which has a black background nearby.
These are Market Orders. Simple right? It’s like buying goods in an online shop; It’s just that what we buy is not new clothes.
2. Limit Entry Order
Limit Entry Order is a type of order in forex trading that is placed to Buy below the current market price, or Sell above the current market price.
For example, USD/JPY is currently trading at 109,858. We want to open a Buy position if the price has dropped to 108,800.
To do this, we can just wait until the price reaches 108,000, then just click Buy with a Market Order. However, we can also place a Buy with a Limit Entry Order now, then leave it.
If later the price does drop to 108,800, then the trading platform will automatically open a sell position at the best price at that time.
Notice, in the picture it appears that the Buy price position (108.800) is lower than the current market price (109.858). Limit Entry Orders like this are a type of Pending Order.
Traders can take advantage of it, if they believe that the price will reverse after reaching a certain level, or in the fancy term, a reversal.
3. Stop Entry Order
Stop Entry Order is also a type of Pending Order, but its function is different from Limit Entry Order.
Stop Entry Orders can be used if we want to open a Buy position above the current market price, or sell below the current market price.
This is used if we expect the price to continue moving in the same direction.
For example, USD/JPY is currently trading at 109,846 and appears to be moving upwards. We think that the price will go up faster and higher again when it hits 111,412.
Next, we can wait until the price reaches 111,412 and then click Buy with a Market Order, or now we can also place a Stop Entry Order at 111,412.
Later, because there is a Stop Entry Order, the Buy trading position will be executed automatically when it reaches the specified price, even though at that time we are not staring at the computer.