Forex trading involves buying and selling currencies to make a profit. To do this successfully, it’s essential to understand the different types of orders in forex trading.
This guide will explain the various order types and how to use them effectively in your forex trading strategy, from market orders to limit orders.
A downloaded PDF cheat sheet of the types of orders in forex trading is also available for download below.
What is an Order in Forex Trading?
An order is like telling the computer what you want to do; for example, you can buy 100 euros for 120 dollars. It’s an instruction.
So, you would place an order with your trading platform, which would tell the computer to buy 100 euros for you when the price is 120 dollars or less.
Or, you can sell 50 euros for 60 dollars. So, you would place an order to sell 50 euros when the price is 60 dollars or more.
Once you place an order, the computer will monitor the price and execute the order when the conditions are met. It’s like having a robot helper who does all the work for you!
Forex Orders PDF Cheat Sheet
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The Major Types Of Orders in Forex Trading.
There are different types of orders in forex trading. Some are orders you would apply in your day-to-day trading, while others are used sparingly.
It’s worth noting that some brokers may offer additional order types or have slightly different names for the ones listed below. Therefore, it’s essential to understand the specifics of the order types your broker offers before using them.
All the types of orders in forex:
- Market order
- Stop Order
- Stop Loss Order
- Pending Order
- Limit Order
- Take Profit Order
- Trailing Stop Order
- One-Cancels-the-Other Order (OCO)
- If-Done Order
- Good-Till-Cancelled Order (GTC)
- Immediate-Or-Cancel Order (IOC)
- Fill-Or-Kill Order (FOK)
- Day Order:
- Good-For-The-Week Order (GFW)
- One-Triggers-the-Other
These orders can be classified further, as explained below in this article.
The Market Order.
The market order is the most common type of order in forex trading. It is an order to buy or sell a currency pair at the current market price. A market order is executed instantly as long as there is enough liquidity in the market.
Market orders can be further grouped into:
- Market Buy Order and
- Market Sell Order
Suppose you want to buy 100,000 units of EUR/USD currency pair at the current market price. For example, you would place a market buy order with your broker, specifying the currency pair and the quantity you want to buy.
If the current market price for EUR/USD is 1.1800, the order would be executed at that price, and you would be filled at 1.1800. The execution of the market buy order means you are buying 100,000 euros at a price of 1.1800 dollars per euro.
Alternatively, if you want to sell 50,000 units of EUR/USD at the current market price, you would place a market sell order with your broker.
If the current market price for EUR/USD is 1.1850, the order would be executed at that price, and you would be filled at 1.1850. The execution of the market sell order means you are selling 50,000 euros at a price of 1.1850 dollars per euro.
Stop Order
A stop order is an order to buy or sell a currency pair once the market reaches a specified price, known as the stop price.
This type of order is often used as a risk management tool, as it can help you limit your losses or protect your profits in an open position.
A stop order is like a helper robot that automatically buys or sells for you when the price of a currency pair reaches a certain level that you set.
For example, you might place a sell-stop order below the entry price to limit potential losses if the market moves lower. Once the stop price is reached, the order becomes a market order and is executed at the best available price.
It’s important to note that stop orders do not guarantee a specific execution price. The market may move quickly, and the order may be executed at a worse price than anticipated.
Let’s say the current price of the euro is 1.1800 dollars. You might set a stop order to buy euros if the price reaches 1.1850 dollars. When the price of the euro reaches 1.1850 dollars, the stop order is triggered, and your helper robot buys euros for you automatically at that price.
Similarly, if you think the euro price will go down, you can set a stop order to sell euros if the price reaches a certain level. For example, if the current price of the euro is 1.1800 dollars, you might set a stop order to sell euros if the price reaches 1.1750 dollars. When the price of the euro reaches 1.1750 dollars, the stop order is triggered, and your helper robot sells euros for you automatically at that price.
Most beginner traders confuse stop orders with limit orders. Keep reading as I explain the differences in this article.
Image Explaining Stop Order – Buy
A stop entry order is triggered
Image Explaining Stop Order – Sell Example
Order is Executed Below
Stop-Loss Forex Order:
A stop-loss order is a type of stop order that is used to automatically close a position at a pre-determined price level, to limit losses. It is commonly used to manage risk in an open position.
When you open a trade in forex trading, it’s crucial to have a plan in place for managing risk. One way to do this is by using a stop-loss order.
A stop-loss order is like a safety net that helps protect you from significant losses if the market moves against your trade. It’s a type of order that automatically closes a trade if the price of a currency pair reaches a certain level that you set.
For example, let’s say you buy 100,000 units of EUR/USD at 1.1800 dollars, hoping that the price will go up.
However, if the price drops, you could use a stop-loss order to limit your losses.
You might set a stop loss order at 1.1750 dollars, meaning if the price of EUR/USD falls to 1.1750 dollars, your trade will automatically close, and you will sell the currency pair to limit your losses. This way, you won’t lose more than the amount you set for your stop-loss order.
You can also use stop loss order to protect your profits or parts of your profits in an open position.
See the image example below, where the Stop loss is set in The Opposite Buy Direction.
In the image below, stop loss is set in the opposite sell direction
Limit Order
A limit order is an order to buy or sell a currency pair at a specific price. The order will only be executed if the market reaches the specified price level.
Limit orders can help you manage risks and minimize your exposure to market volatility.
There are Four types of Limit Orders:
- Buy Limit Order
- Sell Limit Order
- Buy Stop Limit Order
- Sell Stop Limit Order
Buy Limit Forex Order:
A buy limit order is a type of limit order used to buy a currency pair at a specific price or better. It is typically used when a trader believes the market price will decrease in the short term before increasing in the long term.
Here’s an example of how to use the buy limit order:
Let’s say the current market price of EUR/USD is 1.1800, but you believe the price will drop to 1.1750 before increasing in the long term. You can place a buy limit order to buy EUR/USD at 1.1750 or lower. If the market price reaches 1.1750, your buy limit order will be executed.
Below, The Order Is Executed
Sell Limit Forex Order
A sell limit order is a type of limit order used to sell a currency pair at a specific price or better. It is typically used when a trader believes that the market price will increase in the short term before decreasing in the long term.
Here’s an example of how to use the sell limit order:
Let’s say the current market price of GBP/USD is 1.3800, but you believe the price will rise to 1.3850 before decreasing in the long term. You can place a sell limit order to sell GBP/USD at 1.3850 or higher. If the market price reaches 1.3850, your sell limit order will be executed.
Below, The Order is Executed
Buy Stop Limit Order
A buy-stop limit order is a type of limit order used to buy a currency pair at a specific price or better after the market has already started moving in an upward direction.
Here’s an example of how to apply for the buy-stop limit order:
Let’s say the current market price of USD/JPY is 108.00, and you believe that the price will continue to rise if it breaks above the resistance level of 108.20. You can place a buy-stop limit order to buy USD/JPY at 108.25 or higher if the market price breaks above 108.20.
Sell Stop Limit Order
A sell-stop limit order is a type of limit order used to sell a currency pair at a specific price or better after the market has already started moving in a downward direction.
Here’s an example of how to use the “sell stop-limit order”:
Let’s say the current market price of AUD/USD is 0.7700, and you believe the price will continue to fall if it breaks below the support level of 0.7650. You can place a sell-stop limit order to sell AUD/USD at 0.7640 or lower if the market price breaks below 0.7650.
The Take-profit Forex Order.
A take-profit order is an order to automatically close a position at a pre-determined price level to lock in profits. It is commonly used to manage risk in an open position.
As a forex trader, take-profit orders can be beneficial since they enable you to automatically secure profits without the need to constantly monitor the market. This tool is valuable for ensuring profitability and reducing the need for constant attention to trading activities.
They help you set clear profit targets and avoid the temptation to hold onto trades for too long, which can lead to losses if the market suddenly turns against them.
It’s important to note that take-profit orders are not guaranteed to be filled at the exact price you set, especially during high volatility or low liquidity. However, they can still be useful in helping you manage risk and protect your profits in forex trading.
For example, you buy 100,000 units of EUR/USD at 1.1800 dollars and want to take profits if the price reaches 1.1900 dollars.
You can set a take profit order at 1.1900 dollars, which means that when the price of EUR/USD reaches 1.1900 dollars, your trade will automatically close, and you will sell the currency pair to take profits.
Similarly, if you sell 50,000 units of GBP/USD at 1.3900 dollars, you might set a take profit order at 1.3800 dollars. This means that when the price of GBP/USD falls to 1.3800 dollars, your trade will automatically close, and you will buy the currency pair to take profits.
Image Example of Take Profit in The Buy Direction Shown Below
Image Example of Take Profit in The Sell Direction Shown Below
Take Profit Sell Direction
Trailing Stop Forex Order
A trailing stop order is a type of order that is used to automatically adjust the stop loss level of a trade as the price of a currency pair moves in a favourable direction.
The purpose of a trailing stop order is to help you lock in profits and limit losses as the market moves.
For example, let’s say you buy 100,000 units of EUR/USD at 1.1800 dollars, and you set a trailing stop order of 50 pips.
This means that if the price of EUR/USD rises by 50 pips (0.0050 dollars), the stop loss level will automatically move up by 50 pips to 1.1750 dollars.
If the price of EUR/USD continues to rise, the trailing stop order will continue to adjust the stop loss level, always keeping a 50-pip distance from the current market price. This way, if the price suddenly drops, your trade will be closed automatically, locking in your profits.
Follow the images below To See How the Trailing Stop Order Adjusts The Stop Loss Until is Triggered
next, the trailing stop adjusts the stop loss position
next, the trailing stop adjusts the stop loss position again
Below, the trailing stop adjusts the stop loss position for the third time
and then, the trailing stop finally triggers the the stop loss
Other Less Popular Types of Orders in Forex Trading
Below is a list of other types of orders in forex trading that are less popular and commonly used. But as a trader that knows who knows her onions, you should learn about them too.
- If-Done Order: An if-done order is a pair of linked orders that are placed simultaneously whereby. If the first order is executed, the second order is automatically triggered.
- Good-Till-Cancelled Order (GTC): good-till-cancelled order persists in the market until it’s executed or terminated by the trader. This type of order allows for extended exposure to the market until specific conditions are met. You have the sole responsibility of cancelling this kind of order.
- Immediate-Or-Cancel Order (IOC): An order known as immediate-or-cancel requires execution without delay, or it must be cancelled if execution is not possible. This type of order prioritizes the swift execution of trades, even if the entire order cannot be filled.
- Fill-Or-Kill Order (FOK): A fill-or-kill order is an order that must be executed in full immediately or cancelled if it cannot be executed. This type of order is used for large trades that require immediate execution.
- Day Order: A day order is an order that remains in the market until the end of the trading day, after which it is automatically cancelled. This type of order is commonly used for short-term positions.
- Good-For-The-Week Order (GFW): A good-for-the-week order is an order that remains in the market for the duration of the trading week, after which it is automatically cancelled. This type of order is used for longer-term positions.
- One-Cancels-the-Other Order (OCO): A one-cancels-the-other order is a pair of linked orders that are placed simultaneously. If one order is executed, the other order is automatically cancelled. An OCO order is usually used to simultaneously set both a stop-loss and take-profit order.
Frequently Asked Questions(FAQs)
The main difference between limit and stop orders is their purpose. A limit order is used to enter or exit a market at a specific price or better, while a stop order is used to limit losses or lock in profits by triggering a trade when a specific price is reached.
SUMMARY – Types Of Orders In Forex Trading
Understanding different types of orders in forex trading and how to use them is vital to your success.
Order is a way to give trading instructions to your trading platform or broker.
Standard forex orders include; market orders, limit orders, pending orders, trailing stops, stop loss orders and take profit orders.
Note: all pictures were taken with the trading view platform
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