Forex Order Types
Each participant in the market has a different level of access, whether it be different spreads in price or volume of capital traded. Different brokers specialize in each of the vastly different types of investor. The following section will focus on the individual, or retail, trader and give individuals some idea of what types of orders to look for in a broker.
Anyone with a computer and a reliable Internet connection can trade currencies. Unlike domestic stocks, you do not need vast amounts of money. With as little as $100 and some old-fashioned book learning, you can be on your way to playing the FX market. Because of the market’s unregulated nature and extreme liquidity, even small amounts of money can be readily traded. Furthermore, leverage provided by brokers allows the individual trader to manage much more currency than an individual would have readily accessible under normal conditions.
There are different types of trade orders that a broker may or may not allow you to use. The most conventional order is the standard market order. This is what happens when you simply hit the buy or sell button on your trading software. Orders are completed using the most current quote prices. The downfall to this type of trade is that you must time your order right to get the price you want. Constant supervision of the market is required.
Other types of orders are filled on a more automatic basis. A limit order, for example, is an order that is to be filled at a certain price. You decide which price you would like to buy or sell a specific currency at, let your broker know through the necessary means, and then sit back and wait. If the market reaches the price you specify under the timeline given, your order will be filled. If not, nothing will happen.
Stop-loss orders are orders that automatically exit a trade. Once you have bought a currency, it is possible to place a stop-loss order so that if your newly purchased currency falls below a certain price, it is automatically traded for you. This is a great method for minimizing losses. Stop-losses can and should be readjusted throughout the life of a deal if the price continues to rise. This will help ensure a profit if the market takes a drastic turn for the worse,
A take-profit order is the opposite of a stop-loss. This order specifies when to get out of a trade while it is going well. This method works well if you think the market may soon reverse itself, or if you are just eager to lock in a small profit. Like stop-losses, these can be readjusted continuously. If the market continues to play out in your favor, there is no reason why you should settle for a minimal gain. Readjust your take-profit limit to account for the improving market.