People who are involved in foreign exchange, stock, or contract trading will find that there are many types of orders when placing orders: "stop loss order", "limit order", "pending order", which often make novices feel confused and don't know how to use them.
Order placement skills are also a science. Whether you are trading stocks, foreign exchange, cryptocurrencies or futures, understanding the different order types and how to place orders will be very helpful in improving your trading strategies.
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In this article, let's learn about the common types of orders in trading. How can we use different orders efficiently? 1. What are the orders in trading?
Market Order
Pending Order
Stop-Loss Order
Buy Stop Order
Sell Stop Order
Buy Limit Order
Sell Limit Order
Trailing Stop Order
There are generally two modes in the trading market: trading at market price and trading with pending orders.
A pending order is a restriction condition. Common ones include stop-loss order, stop-loss buy order, stop-loss sell order, limit order, limit buy order, and limit sell order.
2. Market Order
A market order or market price order, also known as a Market Order, is actually an order to buy/sell as quickly as possible. Investors do not need to preset the transaction price, they just need to place the order immediately.
It is the most common type of order at present. The advantage of market order is that the order can be completed almost instantly, and it is easy to be executed as long as there is sufficient liquidity. But the disadvantage is obvious. Since the market is changing every moment, the actual transaction price may not be exactly the same as the market price you see at the time. It is very likely that you will buy at a very high price in an instant. Some platforms may have slippage. So generally, if you are not in a hurry, try not to use market order.
3. Pending Orders
A pending order, also known as a limit order trading mode, is an order based on certain conditions and will not be executed immediately. Investors preset the transaction price, transaction amount, validity period and other conditions in the trading system, and the system automatically triggers the transaction when the conditions are met.
The operation of pending orders is indeed more complicated than that of market orders, but making good use of pending orders can free investors from watching the market and help control trading risks.
4. Limit Order
Buy Limit
The buy limit price is to specify the order price in advance, and automatically buy when the market price is equal to or less than the specified price of the order.
For example, if the current market price of EUR/USD is 1.2203, and you estimate that the price will fall, you can set a buy limit order at 1.2150. When the price falls to the set point, the transaction will be automatically executed.
Sell Limit
A sell limit order is a sell order that specifies an order price in advance and is placed when the market price is equal to or greater than the specified price.
For example, if the current market price of EUR/USD is 1.2203, and you want to sell when the price rises to 1.2213, then set a sell limit order at 1.2213. When the market price reaches this price, the transaction is automatically executed.
5. Stop Loss Order
Buy Stop
Specify the order price in advance and place a buy order when the market price is equal to or greater than the specified price.
For example, if the current price of EUR/USD is 1.2203, and you estimate that the price will continue to rise when it breaks through 1.2208, we can set a buy stop order at 1.2208. When the price reaches 1.2208, the system will be triggered to buy at the current market price, and no transaction will be made if the price is lower than this price.
Sell Stop
Specify the order price in advance, and sell automatically when the market price is equal to or lower than the specified price.
For example, the current price of EUR/USD is 1.2203. After analysis, you think that the price of EUR/USD will continue to fall when it drops to 1.2150. In this case, you submit a sell stop order for 1.2150. That is, when the market price drops to 1.2150, the transaction will be automatically sold, and no transaction will be made when the price is higher than this price.
6. Trailing Stop Order
Trailing Stop Order is a special order, also known as moving stop. Your stop price will automatically adjust as the price changes.
When the price moves in your favor, your stop loss order will be automatically updated according to the latest price. On the contrary, when the price moves in the unfavorable direction, the stop loss order will be triggered and the position will be closed at the loss point distance you set.
For example, if the current price of EUR/USD is 1.2170, you choose to go long and set the trailing stop loss distance to 20% (20Pips). When the product price is 1.2170, your stop loss price is 1.2150. If the product price rises to 1.2203, the stop loss price will be updated according to the distance you set, and your stop loss price is 1.2183. On the contrary, when the product price drops from 1.2203 to 1.2183, the trailing stop loss will be triggered and the position will be closed at 1.2183.
This is how you maximize your profits and limit your losses.
7. How to place limit orders and stop-loss orders?
In the order panel, you can set stop loss, limit price, take profit, and trailing stop loss orders at will. For example, I placed a pending order to buy gold XAUUSD, the transaction quantity is 0.01 lots, and set the acceptable stop loss and limit price points. After setting, click Finish, and the order is placed successfully.
8. Use different orders to combine your trading strategy
Learning to use limit orders and stop-loss orders has many benefits
If you trade frequently, you will definitely encounter situations where the market fluctuates violently. At this time, pending orders are the most effective strategy. In a short period of time, prices fluctuate very quickly, and we often don’t have time to make the right response, and sometimes we can’t watch the market 24 hours a day. At this time, using stop-loss orders or limit orders can effectively help you seize the opportunity.
Although market orders are fast, they are very risky if you do not set a stop loss point. If the transaction direction is not in your favor, you may lose all your capital.
Flexible use of limit orders and stop orders can maximize profits, because unreasonable settings will only make you lose money. It should be noted that most traders use the most common order types, and ordinary traders do not need to design a trading system that is too complicated and full of special orders.