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Forex Order Types

When you want to buy or sell a currency pair there are different types of orders that you can use to customize your trade execution to fit your strategy.

Market Order

The first type of order is a market order where you buy or sell at whatever price the market will be at. The one problem with this type of order is that you are susceptible to price fluctuations that might occur while your order is being executed. Lets say you put in a market order for a currency pair but as soon as you did, the pair raised 20 pips. If the trade hadn’t been fully executed yet, you would have no choice but to buy the pair at a 20-pip premium.

Limit Entry Order

A limit entry order is where you place an order to buy at a currency pair at a price below the current market price, or if you’re selling, sell above the current market price.

Stop Entry Order

A stop entry order is the opposite to a limit entry order in that you are restricting to buy if the price goes above the currency market price, or sell if the price goes below the current market price. A good example of when a stop entry order might be used is when you would like to buy or sell if a price breaks through its resistance or support levels. With a stop entry order your trade will only go through if the support or resistance levels are broken.

Stop Loss Order

Another type of order is a stop loss order. A stop loss order is where you set a price at which if a price drops below that price level, you will automatically sell that security. Stop loss orders are used to prevent big losses and are an important part of trading as it allows you to limit the downside of any trade without having to constantly monitor price changes.

Trailing Stop Loss Order

A trailing stop is similar to a stop loss order in that it limits the downside to any trade, but in this case the level at which the stop occurs fluctuates. In most cases a trailing stop is set at a fixed level below the current price. For example, if you set a trailing stop and the underlying asset increased in price, then the trailing stop would also increase by the same amount that the asset increased by. The only time a stop would occur and your position closed out would be when the change in price of an asset changes by the same or more than the amount of the stop loss. If you stop loss was set for 50 pips below your current price, then only if a pair decreased by 50 or more pips within a defined time period would the stop occur.

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