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Forex trading certainly
isn’t a simple business. In fact, you have to get used
to an entirely new vocabulary once you get into forex trading.
You’ve got to familiarize yourself with spreads, pips,
base currencies and so on. Orders, despite their innocuous name,
are actually very important in forex trading. There are several
types of orders and you have to know how each one works, lest
you put yourself at a disadvantage.
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Market
Orders
The most
basic kind of order, market orders simply tell your broker to
buy or sell a certain currency at the current price. It’s
very straightforward, really. You can issue a market order just
by specifying the currency pair and the number of units to be
traded, and then you’re all done. In this day and age of
the internet, your market orders can be executed almost instantaneously,
and they’re never more than a mouse click away.
Limit
Orders
A big part
of forex trading is about waiting for the right price to buy
or sell certain currencies. Of course, you have the option of
waiting yourself for the prices to reach the desired level,
and then issuing a market order when they do so. Alternatively,
you could issue a limit order.
Limit orders
basically tell your forex broker to buy or sell when the prices
of the currencies reach a certain point or value. It saves you
the hassle of manually waiting for the prices to increase or
decline, leaving you with a lot more time and a lot less trouble.
Stop-Loss
Orders
It’s
extremely difficult to completely predict or ‘read’
the forex trading market, and it’s common for the prices
of currencies to just drop or jump up. Such events happen despite
your best efforts at analyzing the situation and anticipating
such occurrences.
Stop-loss
orders can be seen as a form of damage control for you. For
example, say that you were expecting a certain currency to go
up from a price of 1.4476. You can issue a market order to buy
that currency at that price, and then at the same time put out
a stop-loss order for the same currency at 1.4440. That way,
if the currency suddenly defies expectations and suddenly drops
in value, you automatically sell at 1.4440. This minimizes your
losses to a predictable extent.
One Order
Cancels the Other (OCO)
You’ll
likely make the most of this type of order once you’ve
been in the forex trading business for some time. It’s
best used when you’re uncertain about a currency pair and
you know that the price could move sharply either way. An OCO
order has you place two orders: one to buy at a lower price
and one to sell at a higher price, whichever comes first. When
one order is executed, the other is automatically cancelled.
OCO orders allow you to easily maximize and price movements.
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