Which one works better, stop order, or
limit order? Many traders differentiate these two and simply choose any of
these without realizing its actual purpose. You may get confused with these two
if you lack knowledge before entering the market. Because of that, you end up
entering the wrong path or wrong direction. So, what are the different types of
orders in the Forex market?
Different Types of Orders
Market Order
The first and considered as the basic order is the market order. It communicates your likes in entering the market depending on the market price. There are also no restrictions in the market order and offers few limitations that get filled up.
Most of the time, market orders work great together with low market volatility periods. If the Forex market has very high volatility and liquidity, the price could move even before the order gets placed. Another thing to remember is that market orders must not be used during the closing or opening of the Forex day since these periods are considered the most volatile periods.
Limit Orders
This type of order is known to be the next most common type of order in the market nowadays. A limit order is responsible for communicating your likes to purchase with the market price that is below the normal range. Think of this as getting a bargain. However, one important consideration when it comes to using limit orders is your decision in getting filled. If you think that the market is going inactive then this is the perfect time to make limited orders.
But if you are looking for an exit after your trades go against you, this type of order might be harmful to you. You should also not use this limit order if you are interested in entering a position right before the Forex market goes off a limit order.
Stop Orders
Finally, last but not least is the stop orders. This type of order is also frequently used in Forex and it is somewhat complex especially for beginners or those swing traders. But if you are truly dedicated to becoming a swing trader then you should learn more about this type of order.
A stop order is another type of order in the Forex market in which you buy with a predetermined price above the latest market price while selling it at a predetermined price much lower than that of the current price in the market. Through the help of stop orders, it protects the long positions that you have from the fast and sharp movements of the market.
Another famous use of this order is when entering a long position right above the market price while entering short positions just below the market price. The only downside of this order is that no guarantee is given that the stop price can be rightfully filled. By the time the market trades, the stop order will become the market order. If this happens, your order will then get filled with prices above the long entry order or below the stop order.
1 comments:
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