A market order is an order that you give to your online forex broker to enter or exit a trade at the best price available at a given time. In such a rapidly changing market, there may sometimes be a difference between the price when the market order is given and the actual price; hence, this type of order can result in a loss or gain of several pips. Make sure you ‘re using the right strategy, and when you place this order with your broker the market conditions are ideal.
The limit order is a command you give your broker to execute a transaction (buy or sell) at or better than a specified price. They can be used to buy currencies below the market price or to sell currencies above the market price. The purpose of this type of order is to enable you to enter the market at a better price, or at an attractive price.
An essential technique of risk management is placing an order, such as a stop-loss that will automatically close the trade if the market reaches a certain level. A stop-loss order is an instruction allowing the platform to close its open position once it has reached a specific level set by you. As the name suggests, this will be at a price below the current level of the market and will be triggered into losing trades to help minimize losses.
Trailing Stop Order
In contrast to the take profit order, if the currency moves in an unfavorable direction, the trailing stop order, also known as the profit-protecting stop order, represents an order you give your forex broker to buy or sell. It is similar to the stop-loss order, but the main difference is that the trailing stop moves as the price moves – allowing you to secure the profits while also decreasing the potential capital loss in the event that the trade does not work out.
Take Profit Orders
The take profit order represents an order that you give your forex broker to automatically close the trade when it reaches a certain point in the desired direction. Since the price can reverse unexpectedly, you need to set a take profit value to automatically take the profit before it moves in the opposite direction. Usually this order is used in conjunction with the stop-loss one, and the ratio of the amount of profit pips taken to the number of stop-loss pips is known as the risk to reward ratio.
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