Types of Forex Orders | Learn To Trade With Pip Academy
Length : 7.30 Minutes 

Types of Forex Orders

Market order refers to the way you will enter and exit a trade. In other words, when you decide to place a buy or a sell order you have to choose one of the order entry types as a way to get into and exit the market.

 

Below are the five types of forex orders for entering and exiting the market: 

 

1) Market Order 

2) Limit Order 

3) Stop Order

4) Stop-Loss Order

5) Take-Profit Order

 

Market Order

 

A market order is a type of order that you want to enter the market at the current price or the best available price.

The market order allows you to enter the market immediately at the best available price.

 

For example, let's assume the bid price for GBP/USD is currently at 1.2920 and the ask price is at 1.2925.

If you decide to buy GBP/USD at market, then it would be sold to you instantly at the price of 1.2925, or to put it differently, GBP will be sold to you by the broker at the price of 1.2925 US dollar. 

All you have to do is to click the buy on your platform and the broker would immediately execute a buy order at the given ask price.

 

However, if you decide to sell GBP/USD at the same bid and ask price mentioned above. Your order will be instantly executed the price of 1.2920. Thus, the broker will buy the GBP from you at the price of 1.2920 US dollar. 

Forex Orders

(Market order entry in Metatrader platform)

Limit Order (Pending Order)

A limit order is an entry order placed to either buy below the market price or sell above the market price. A sell limit is filled at a specified price or higher and a buy limit is filled at specified price or lower.

In other words, your order will be executed only if the price comes to your desired price level. 

For example, let's assume that the GBP/USD is priced at 1.3020, and you decide to sell it once it reaches to 1.3040. In this case you can simply place your sell limit above the current market price of 1.3020. Your sell limit order will be only activated if the GBP/USD rate rises and reaches to your sell limit order price at 1.3040.

Limit Orders

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Forex Pending Order

(Pending order entry in Metatrader platform)

Stop Order (Pending Order)

 

Just the exact opposite of limit order is stop order. A stop order is an entry order placed to buy above the market price or sell below the market price. This simply means that you only enter the trade if the market moves in your favour.

 

For example, let's assume that the GBP/USD is priced at 1.1320, and you decide to sell if it continues to fall further to 1.1300, where you place your sell stop order. Once EUR/USD reaches to 1.1300, the sell stop order placed earlier will be activated. 

Conversely, If you decide to buy once it rises to 1.1340, then you place your buy stop order at 1.1340. Once the GBP/USD rate rises and hit your buy stop order at 1.1340, the order will be activated and you are in. 

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Metatrader Pending Orders

(Pending order entry in Metatrader platform)

Stop Loss Order (SL)

 

This type of order is different in nature from the earlier orders that we discussed. The earlier orders are classified as entry orders, as each one of them are used to get into the market. However, the stop loss order (SL) is classified as exit order. Once triggered, it closes your trade at the pre-set stop price level known as SL order. 

Stop loss orders are very important as they are considered as an effective risk management tool to limit the losses. 

For sell orders, stop loss has to be placed above the entry price, and for buy orders stop loss has to be placed below the entry price. 

 

For example, let’s assume that you are in the market for long at the price of 1.1320 on EUR/USD and you place your stop loss at 1.1300 to limit your loss. If the market goes against you and bounce back to 1.1300, your order will be automatically closed at 1.1300 because your stop loss that was placed earlier will be triggered. 

Stop Loss Order

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Conversely, if you are in the market for short on EUR/USD at 1.1320 and you place your stop loss at 1.1340 to limit your loss. Once the market goes against you and rises to 1.1340, your order will be closed at 1.1340. 

Please note, spread is not taken into consideration for the both examples, if so in this case the closing price will be slightly more than 1.1340 depending on the spread offered by the broker. 

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Metatrader Stop Loss Order

Take Profit Order

 

Just like stop loss order the take profit order is also classified as exit order. Take profit orders work just the opposite of stop loss orders. Once triggered they close your trade but this time on profit. Thus, it can be said that they are used to limit your profit to a predetermined stop profit level known as TP order. 

For sell orders take profit has to be placed below the entry price, and for buy orders take profit has to be placed above the entry price. 

For example, let’s assume that you are in the market for short at the price of 1.1320 on EUR/USD and you place your take profit at 1.1300. If the market goes in your favour and fall to 1.1300, your order will be automatically closed at 1.1300 because the take profit that was placed earlier will be triggered and you will exit the market with profit.

Take Profit Order

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And just the opposite of sell orders works for placing the take profit on buy orders.

Take Profit Order

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Metatrader Take Profit Order

( Take-profit order in Metatrader platform)

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