DotBig explains how to use different order types at Forex brokers
Before you start trading at forex brokers with real conditions, you have to cover several basic terms about trading. In particular, you should understand how different interactive brokers order types. This knowledge is essential for you because order is one of the factors that determine your trading strategy. If you know how different order types functions, you can use them to your advantage to enter and exit trades profitable. In this review, we are going to cover the most common order types you need to know before you start trading in real market conditions.
Introduction to Forex orders
First of all, we need to define the term forex orders. In a nutshell, this is an offer that a trader sends to a trading platform. This is done to open or close a trade when the pre-specified conditions set by a trader are satisfied. The type of order refers to the way you will enter or exit a chosen position.
There are different stock order types, and to trade beneficially, you need to know which of them are accepted by your trading platform. Not all brokers accept the same selection of order types. If this is crucial for your forex trading strategy, learn the available order types in advance.
Forex trades might be processed with the help of different order types. Although the availability of these types is up to the broker, there are some basic options common for all trading platforms. As a rule, two major categories are specified:
- Market order. If you trade with a market order, then it will be executed for a price available at that specific moment. Market orders are subcategorized into sell stop and buy stop in forex.
- Pending order. This type of order isn’t executed immediately because it waits until the price specified by a trader is set. Pending orders are subcategorized into buy limit and sell limit forex orders, sell stop and buy stop.
Types of orders in trading
Let’s find the key differences and similarities of various types of orders in trading on the Forex market.
This type of order is the simplest one. Also, it requires less time than the other types to be executed. This is because it’s processed at the current price. For instance, the EUR/USD bid price is 1.1899. The ask price is at 1.1903. If you choose a market order to be executed, you will buy the asset for the price of 1.1903.
To finish such a deal, you don’t need to do a lot. This depends on the functionality of your trading platform. On DotBig, for example, you can just click the “buy” button and the platform will automatically execute the order at the chosen ask price. If the market conditions are too volatile, the final price might change during the execution. Such an event in trading is called slippage.
This order isn’t executed immediately after you agree on the deal because here you are required to set the forex buy limit. If you are selling a position, you should set the set limit. If you choose this type of order, then your trade will be executed only at the desired price. Using limit orders is the way to avoid slippage when trading.
This order is triggered when the price of the chosen asset gets to the set limit. Thus, it won’t be executed if the price of a deal isn’t beneficial for you. This is a huge advantage of this type. However, on the other hand, there is a risk that the price will never get to the point when it’s beneficial for you. In such cases, this order won’t be executed.
Stop Entry Order
This type of execution is somehow similar to the previous one. Here you need to set a stop price. When you decide to buy stop in forex, your order won’t be executed unless the price increase to the stop price. The same rule is applied when you set the sell stop price for a trade.
Stop Loss Order
There is one key difference between the stop loss order and the options mentioned before. Limit and stop entry orders are all entry orders that are used to get you into a deal. The stop loss order, on the other hand, is triggered when you are about to exit a trade.
DotBig provides its clients with the possibility to use stop loss orders. They help traders to avoid extra losses if the price becomes unfavorable.
The bottom line
On the whole, order types are extremely important for your trading strategy in the foreign exchange market. Some of them, such as stop losses, might be very useful for beginners who aim to avoid big losses in the early stages of their trading careers. If you know how to correctly implement a specific order type in your strategy, you have a bigger chance to avoid the negative impact of unexpected events.
We hope that after reading this review, you understand the basic notion of each order type. Use this knowledge to benefit from trading on the DotBig trading platform!