For some beginner in online Forex brokers, orders might be interpreted in many ways. Quite similar to other “orders” in a café or restaurant, orders here means a request or command someone to do something. In this business, order means requesting each trader to sell or buy foreign exchange which is determined by the capital market and economic condition.
Explanation of Each “Order” in Trading
In trading, there are several types of order which can be helpful for traders. By understanding types of order, the trader will determine which order must be taken based on the trading plan. Actually, there are some kinds of orders that can be made in this explanation.
- Instant Order or Market Order
It happens when a trader is in a buy position of certain currency pairs such as EUR/USD and gets profit if EUR value increases or USD value decreases. Meanwhile, in a sell position, the trader will get a loss if the EUR value decrease, and or USD value increase.
- Take Profit and Stop Loss
In taking a profit, the trader is supposed to be in a buy position. Buy value will be closed if the bid level reaches the price of taking a profit. While the sell value will be closed if the ask level decrease and reaches the price of taking a profit. Stop-loss in this case will apply in contrary to taking a profit. It is important for traders to understand this in online Forex brokers
- Pending order
It consists of a buy stop and sell stop. An order can change as a buy stop if the ask value is as worth a buy stop price. In buy stop transactions, the buy stop cannot be opened if the current price is lower than the price in buy stop transaction. Simply, if the price increases over price X, you can buy and use a buy stop. On the contrary, a Sell stop applied if the bid value is as worth a sell stop price. Sell stops can be opened if the current price is higher than the price in the sell stop. In other words, the price will decrease up to X price, you can sell and use a sell stop.
- Buy Limit and Sell Limit
In buy limit can, an order can change as buy if ask value is as worth as the price in buy limit transaction. Buy limit only can be opened if the current price is higher than the price mentioned in the buy limit transaction. So, if the price decreases until X price, you can buy and use the buy limit. The sell limit, on the other hand, applied the opposite way as the buy limit.
Out of those orders above, we can use different types of execution depends on the trading situation. In online Forex brokers, trading must differentiate two types of execution, namely Market Execution and Instant Execution. Commonly, Market execution can be found easily for ECN broker. In the opening, the value will start from the latest price which is recorded in the broker. The advantage of choosing this market is that traders can start trading without requotes. This execution is also quicker in processing its execution.
On the other hand, Instant execution is done after checking the last price of the order. Brokers usually use this kind of execution by setting up deviation as the price change limits. If the price changes over the deviation limit, the broker will send a notification to traders to do requite. Traders may get advantages from this type because it allows traders to get the position that they want. However, because it changes and moves quickly, sometimes traders lost their opportunity to get a better position.
Before choosing which, one is the best, it is really depends on the situation. Both types are really excellent in their field. If trades are Scalper types that need a quarter minute to finish the transaction, it is better to choose market execution. A scalper really needs a short time to finish executing the orders. Meanwhile, if traders are Swig type which needs accuracy inputting the values, instant execution will be fitted with you. Traders can use their time to calculate which price and position are more suitable with the orders at any level. After all, traders must understand types of orders and order execution first in online Forex brokers to gain more and more profit.