Different Types of Forex Market Orders
The Various Forms of Forex Trading Entry and Exit Orders
In this article we are going to talk about the different types of orders that you can place when you are using your forex trading platform. Nearly all major brokers have advanced trading platforms that allow for these types of orders, but there are a few inconsistencies. One example of this is whether your trading platform allows for hedging (a buy and sell order opened simultaneously for the same currency pair) or whether entering a sell order would simply cancel your buy order. You will want to make sure you get to know your specific trading platform to understand what it is capable of.
The different types of orders that we are going to talk about are basic market orders, OCO orders (One Cancels the Other), GTC orders (Good 'Til Cancelled), stop orders, and limit orders. These are the basic types of entry and exit orders that every major forex broker should support.
A regular forex market order is what you engage in every time you make a simple buy or sell order. You decide whether you want to buy or sell a specific currency pair, and your broker will give you the best possible fill within seconds. This type of order is almost instantaneous, and it is the most common type of order used (since it is necessary for entering the market).
It is possible to use a market order that is not an instantaneous buy or sell order in this way, and that is by entering a specific price at which you would like your order to be filled, instead of entering the market right away. This can be a good entry strategy to use, as you can locate support and resistance levels and only enter the market after a certain value has been hit.
The one problem with this 'targeted' type of market order is that it will usually expire at the end of the day, meaning that if your target entry price was not hit during the trading day then the order will expire. This is where the GTC (Good 'Til Cancelled) order comes in, as you can set a specific entry price that will crossover trading days. This order will stay in queue until one of two things happen: either your target price is hit and you enter the market, or you cancel the order (hence the name good 'til cancelled).
Volatile News Trading (a.k.a. OCO Orders)
Another type of entry order that a savvy forex trader will use is called the OCO (One Cancels the Other) order, also sometimes referred to as a straddle trade. With this type of order, you would be working with one currency pair and you would designate two separate orders: one as a target price to enter on a buy and one to enter on a sell. When either one of these target prices is hit, the other order is immediately cancelled.
There are two popular ways to use this kind of entry strategy. The first has to do with trading around the time of a fundamental news release. You are betting that within a few minutes of the economic release there will be a wild price swing, so you could use an OCO order with buy and sell targets 30 pips away from the current price right before the news is announced.
The second way that forex traders will use an OCO order is when they locate established market highs and lows, or also strong support and resistance levels. They will place a buy order directly above the market high, and a sell order directly below the market low, and if either one of the targets is hit then the other target is cancelled. The reasoning behind this is that if a market is making lower lows or higher highs, there is a good chance that it will continue in that same direction for a while before it retraces.
Stop Orders and Limit Orders
The last types of forex trading orders that we are going to talk about are stop and limit orders, which are really the same thing except a stop order is to cut losses short and a limit order is to lock in profits. It is possible to use stop orders and limit orders to enter the market, but most traders will use these types of orders when they want to liquidate a trading position. When trading it is probably better to make sure you always enter the market with a stop-loss level in mind, so that you know exactly how much money or what percentage of your trading account you are willing to risk. A savvy trader will enter the market with both a predefined profit target and loss target, which prevents haphazard trading based on emotion.
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