|
 |
|
|
 |
 |
Type of Orders | ||||||||||||||||||||||||||||||
| Market Order A market order is an order to buy or sell at the current price. For example, if EUR/USD is priced at [BID]1.20000/1.20015[ASK]. It means in order to buy 1 unit of euro, you need to pay 1.20015 US dollar. 1.20015 is also the known as the ask price. It's the price that dealer willing to sell. If you would like to sell euro against US dollar, you would sell at 1.2000. It's also known as the bid price, meaning it is the price that dealer willing to buy from you. You may realize that there's a different between the bid and ask price. This difference is known as spread. Usually, Forex dealers do not charge a commission. They make money based on the bid and ask spreads. In this case, if you enter a buy euro position, you are instantly down 1.5 pips. Therefore, you must wait for the price to come up to [BID] 1.20015/1.20030[ASK] in order to breakeven. Stop-Loss Order You can get the basic idea from its name. Stop-loss order enables you to get out of a position at a certain preset price with a loss. For example, EUR/USD is trading at 1.20000/1.20015. You enter a long (buy) euro position. For some reason, you belive the euro is very likely to weaken in the near term. In order to protect yourself from incurring huge losses due to the potential decline of the euro, you can preset a close price where your position is automatically closed at that price. If you set your stop-loss at 1.19500, when EUR/USD price reaches 1.19500/1.19515, you will be taken out of the market will a loss of 51.5 pips. 1.20015 [close price] -1.1950 [entry price] = 0.00515. Limit Order Limit order allows you to get out of a position at a preset price with a guarantee profit. It works oppositely as stop-loss order. For example, EUR/USD is trading at 1.20000/1.20015. You enter a long (buy) euro position. For some reason, you belive the euro is very likely to strenghen in the near term. In order to secure a handsome profit, due to the rise of the euro, you can preset a close price where your position is automatically closed at that price. If you set your limit at 1.20530, when EUR/USD price reaches 1.20530/1.20545, you will be taken out of the market will a profit of 51.5 pips. 1.20530 [close price] -1.20015 [entry price] = 0.00515. Entry-Stop Buy Order Entry-stop orders are advanced order types. It's sort of like a pending order, where the order will become a working order when the price is hit. Entry-stop buy order enables you to open a buy position above the current market price. For example, EUR/USD is trading at 1.20000/1.20015. You predict the price has an uptrend of 50 pips in the next 2 hours. If the price reaches 1.20500/1.20515, then the upside will transform into a momentum driven trade. However, your strategy or gut feeling tells you that if the price doesn't reach 1.20500 within 2 hours, downward movement is seen. In this situation, you would place an entry-stop buy order at 1.20500. If the price doesn't hit 1.20500 within your expected time, you can cancel the pending order. Entry-Stop Sell Order Entry-stop sell order enables you to place a sell order below the current market price. The order will become working order when the price is hit. For example, EUR/USD is trading at 1.20000/1.20015. You predict the price has a downtrend of 50 pips in the next 2 hours. If the price reaches 1.11500/1.11515, then the downside will transform into a momentum driven trade. However, your strategy or gut feeling tells you that if the price doesn't reach 1.11500 within 2 hours, upward movement is seen. In this situation, you would place an entry-stop sell order | |||||||||||||||||||||||||||||||||
