If you want to stay in the forex market for a long time, it is crucial to understand the different types of orders. The only way to trade currencies on the Forex market is through brokers. Depending on your living area, you can choose from a variety of brokers, although the majority of them are international. You must place an order on your broker’s trading website after choosing a broker.

Forex Order

An order is a request made through the trading platform of the broker. It starts or ends a trade if the conditions outlined by the trader are met. The word “order” basically refers to the method through which you will enter or exit a trade.

There are various types of forex orders you must be familiar with and be able to apply in your trading before diving into the trading world. There are two basic orders that almost all brokers accept.

• Market Order
• Pending Order

Market Order

It is an order that is instantly filled at the price that your broker is offering at the time. It is further classified into buy and sell orders. 

The simplest order to receive immediate market execution is a market order. It is an order to buy or sell at the current price. Let’s take the currency pair EUR/USD as an example. The bid price is now at 1.1120, and the asking price is at 1.1232. If you wanted to purchase EUR/USD at market value, it would be provided to you at the 1.1232 price level.

Similar rules apply when selling a currency pair, except that it will be carried out at a little lower price of 1.1120 and will also be instantly fulfilled. Keep in mind that for any currency pair in Forex, the bid price is always lower than the asking price.

Pending Order

A pending order is a command to carry out a purchase or sell trade, or a market order, only when specific requirements are met. As a result, it might be regarded as a conditional market order. Therefore, until they are actually executed, pending orders are not considered to be part of margin calculations.

Pending orders remove the need to constantly watch the market in order to execute a deal. Instead, it allows traders to put up automatic orders that will immediately execute trades when the required conditions are satisfied. Pending orders and other orders lessen the requirement for manual trading involvement.

Limit Order

It is a request to buy or sell if the market moves to a certain level at a given limit price. Consider a limit price to be a price assurance. You may be sure that your order will only be filled at a limit price if you make a limited order. A “Buy Limit” order can be used to buy anything at or below a specific price. In order to sell at the given price or higher, you can place a “Sell Limit” order.

The order is activated and executed at the limit price once the market reaches the limit price. Limit orders are in your favour and can only be carried out when the price is in your favour. The problem is that your order might never be filled because the market price might never reach your limit price.

Buy Limit Example

Let’s assume that the EUR/USD exchange rate is currently 1.1750. However, if the market declines and the price reaches 1.1700, you should buy long positions in the euro against the US dollar.

A purchase limit order would be placed here at 1.1700. Your order will automatically be triggered if the market price drops to 1.1700 and touches below your specified “Buy Limit Order” price. Essentially, you are attempting to purchase the asset for a lower cost because you consider 1.1700 to be an important support level.

Sell Limit Example

Currently, the EUR/USD exchange rate is 1.1620. Whenever the price reaches 1.1650, you should sell. A sell market order would be placed here at 1.1650. The trading platform automatically executes a sell order at the best price if the price reaches 1.1650.

Stop Order

An order is “stopped” from being executed by a stop entry order until the price reaches a stop price. When you wish to buy only when the price rises to the stop price or sell only when the price falls to the stop price, you use this form of order in your trading strategy.

A market order turns into a stop order when a trend begins, and you believe the new price to be the ideal limit entry order to join the trend. A stop order only executes when the price becomes less favourable to you. Simply use a stop order rather than waiting for the price to reach a specified level. Stop orders come in two different types.

To purchase the currency when the price is rising, place a buy stop order. Place a buy-stop order, for instance, if EURUSD is trading at 1.2245 and you wish to buy it at 1.2270.

To sell the currency when the price is falling, place a sell-stop order. Place a sell-stop order, for instance, if EURUSD is trading at 1.2245 and you wish to sell it at 1.2230.

Conclusion

In the Forex markets, some kind of automation is required. This is due to the market’s 24-hour operation. Therefore, the value of an open position could significantly alter if it is not managed for a few days. Additionally, until you are a large global organization and have the budget to hire individuals to work around the clock, you cannot actively manage the roles 24 hours a day, 7 days a week, manually. Therefore, market orders are useful in this situation. These are the instruments that traders and investors use to passively manage their open positions on the Forex market. Even though the market is active around the clock, these technologies let investors ensure that their trades’ value stays within predetermined limits.