Whenever you execute a trade in the Forex market is called an “order”. There are different order types, and they can vary between brokers. All brokers provide some basic order types, other special order types are not offered by all brokers though, and we cover them all below.
Types of Order in Forex Trading
1. Market Order
A Market order is an order that is placed on the market, and it is executed instantly at the best available price.
2. Limit Entry Order
A limit entry order is placed to either buy below the current market price or sell above the current market price. It is a bit tricky to understand at first so let us take the example:
If the EURUSD is currently trading at 1.3500 and you want to sell the market if it reaches 1.3550, you can place a limit sell order and then when / if the market touches 1.3550 it will fill you shortly. Thus, the limit sell order is placed above the current market price. If you want to buy the EURUSD at 1.3350 and the market is trading at 1.3400, you would place your limit buy order at 1.3250 and then if the market hits that level it will fill you long. Thus the limit buy order placed below the current market price.
3. Stop Entry order
A stop entry order is placed to buy above the current market price or sell below it.
Example: If you want to trade long, but you want to enter on a breakout of a resistance area, you place the buy stop just above the resistance, and you would get filled as price moves up into your entry order. The opposite holds true for a sell stop entry if you want to sell the market.
4. Stop Loss order
A stop-loss order is an order that is connected to trade for the purpose of preventing further losses if the price moves beyond the level that you specify. The stop-loss is probably the most important order in Forex trading since it gives you the ability to control the risk and limit losses. The order remains in effect until the position is modified or cancels the stop-loss order.
5. Trailing Stop
The trailing stop-loss order is an order that is connected to trade like the standard stop-loss, but the trailing stop-loss moves or ‘trails’ the current market price as your trade moves in your favour. You can set your trailing stop-loss to trail at a certain distance from current market price, and it will not start moving until or unless the price moves greater than the distance you specify.
6. Good Till Cancelled Order (GTC)
It is Good until you cancelled the order. If you place a GTC order, it will not expire until you cancel it. Be careful with these because you don’t want to set a GTC and then forget about it simply to have the market fill you a month later in a potentially unfavorable position.
7. Good for the Day Order (GFD)
Good for the day order remains active in the market until the end of the day in Forex trading. The exact time a GFD expires might vary from the broker to broker, so always check with your broker.