Learning the business is vital especially if you are serious in making it your main source of living. One of the basic things that you must learn in forex is how the orders work. Simply, forex orders speak to the broker of your choice the result that you want to attain.
That is, when you think that the value of EUR/USD will increase, then the action you must perform is to place an order. In the same way, if you desire to exit your position, then you have to execute this with an appropriate order.
Buy and Sell Orders
If you sense that the currency pair’s value will increase, you just have to place a buy order. Otherwise, place a sell order if you feel that the currency pair will drop its price.
Note that in every trade, you are required to place both buy and sell orders. For instance, if you initiate the trade with a buy order, then closing it will require you to position a sell order. In the same way, if you start with a sell order, you have to close it with a buy.
Market and Limit Orders
The moment you have identified whether you are to place a buy or a sell order, that’s when you have to choose between the limit and market order. By having a market order placed means that your broker will perform the trade during the next price available.
Considering that the exchange rates are changing at a very fast pace, the value which your trade starts at is possibly just above or below the value that is shown on your screen.
In terms of the limit orders, this lets you identify the actual price that your tarde must be executed at. For instance, if the currency pair of EUR/ USD is valued at 1.1767, you may want to put a buy order when the value reaches 1.1789.
It is vital that you keep in mind that limit orders will be pending until the desired price is complemented by the markets.
Stop- Loss and Take- Profits Orders
Both of these actions are not necessary. Yet, most of the seasoned forex traders use this order type as they let you to a risk-averse way of entering a position. It’s because you have a closing strategy ready to cover for both outcomes.
A stop-loss order automatically closes a trade when you are already losing a certain amount of money. While take- profit orders work the same way but in reverse.
Eventually, every trade you enter must both have stop- loss and take- profit orders in place. It does not just ensure a clear exit plan, but it also eliminates the necessity to set your device to manually close the trade.
Basically, there are three sets of different orders that you have to place in a trade. As mentioned, these include the buy/ sell order, market/ limit order, and stop- loss and take- profit order.
Success in trading can be at hand when you are knowledgeable especially in the basics. It is necessary to pay attention to how the forex orders work so you can be closer to that success you have been wanting in the world of foreign exchange trading.