How to place an order in the forex
exchange market,what are the features?
The knowledge dellle rules of the
orders in the forex market is essential to begin trading. We must
always bear in mind the possible differences that exist between the
various brokers and never forget that the forex market is not
regulated.
In the Forex Market there are many type
orders. Below a brief description.
Market Orders (basic
order)
An basic order to buy or sell a
currency exchange at the current market price. When placing a basic
market order, the currency trader specifies the currency pair he
wants to buy or sell. (GBP/USD,
GBP/CHF etc) and the number of lots he
is interested in buying or selling.
Limit Orders
An order to buy or sell currency at a
specified price or better. Trader specifies currency and price.
Stop Orders
Order that is activated when a
specified price is reached. A stop order becomes a regular market
order when the exchange rate reaches a specified level. Stop orders
can be used to enter the market on momentum or to limit the potential
loss of a position.
Protect a Position
A trader buys 10.000$ (0.1 lot) of
USD/CHF at 1.1200in anticipation of an expected 80 pip rally in the
USD. In order to protect himself from an unmanageable loss, the
trader places a stop loss order at 1.1180 (20 pips below the current
price). This way, if the USD drops instead of rises against the dollar, the trader's loss is limited to 20 pips or $20 in this
example.
Buy on Momentum
Trader expects the EUR to rally vs the
Japanese Yen, but is hesitant to enter a buy order because the EUR/JPY is getting close to
short term resistance at 117. The trader instead places a buy stop order 10 pips above
the resistance level. His stop is thus placed at 117.10. Unless the EUR/JPY goes to
117.10, the order won't be activated. By doing this, the trader is waiting for the EUR/JPY
resistance level to be broken before entering the position.
Trailing Stop Orders
Trailing stop orders can be placed
below the current market value to allow profits to run.
This is a great technique to use so
that a trader does not sell too early into a rally, but at the same time protects himself from
losing profits already gained.
Example: A trader buys the EUR/JPY at 117.10
and it rises to 118. The trader does not want to sell too early, but also does not
want to lose the profit he has already gained. So, a trailing stop loss an be set at say
117.70. If the market continues to move up, the order ill not be activated and the trader
participates in the future gain. Trailing stop orders would then move up to lock in more gains. For
example, if the market moved to 118.20, the trader can now move the
stop to 118, protecting more gains and still not selling in case the
position continues to climb. If the market moves down through the
stop, the trade will be activated and the trader will keep the gain
and exit the position.
OCO (once cancels other)
An OCO order is the simultaneous
placement of two linked orders above and below the current market
price. If either one of the orders is executed in the specified time
period, the remaining order will automatically be canceled.
Example: Price of the EUR/USD is at
1.1340. A trader wants to buy 20,000 $ (0.1 lots) if the rate breaks
the resistance at 1.1395 or wants to sell short if the price breaks
the support at 1.1300. The trader can then enter an OCO order made up
of a buy stop order at 1.1405 (10 pips above the resistance) and a
sell stop order at 1.1290 (10 pips below the support) if the EUR/USD
breaks support and gets to 1.1290, the sell stop order will be
executed and the buy stop order at 1.1405 will be canceled. If
instead, the EUR/USD breaks resistance and reaches 1.1405, the
opposite will take place.
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Types of Orders in Forex Exchange
Market
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Types of Orders in Forex Exchange
Market
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