Types of Orders!

Orders are critical tools for any type of trader and should always be considered when executing against a trading strategy. Orders can be used to enter into a trade as well as, help protect profits and limit downside risk.

 

Understanding the differences between the order types available can help you determine which orders best suit your needs and are best suited to help you to reach your trading goals.

 

The Market Order:

A market order is the most basic order type and is executed at the best available price at the time the order is received. It can be either a "Buy Order" or a "Sell Order".

 

The Pending Orders:

These are orders placed that will become active trades if price crosses a specified price level. These are useful if you are an Trader who will not be in front of the screens to monitor price. They're also ideal to trade "breakouts" or for "trading pullbacks". Pending orders come in two varieties.

 

• A Pending Stop Order: A stop order triggers a market order when a predefined rate is reached. A buy stop order triggers a market order when the ask price is met; a sell stop order triggers a market order when the bid price is met. Both stop orders are executed at the best available price, depending on available liquidity. Stop orders, also called stop loss orders, are frequently used to limit downside risk.
  
  
• A Pending Limit Order: A limit order is an order to buy or sell at a specified price or better. A sell limit order is filled at the specified price or higher; buy limit orders are executed at the specified price or lower. Limit orders allow you the flexibility to be very precise in defining the entry or exit point of a trade. Keep in mind that limit orders do not guarantee that you will enter into or exit a position, because if the specified price is not met, your order will not be executed.

 

A Trailing Stop Order:

A trailing stop is a stop order that is set based on a predefined number of pips away from the current market price. A trailing stop will automatically trail your position as the market moves in your favor.

 

If the market moves against you by the predefined number of pips, then a market order is triggered and the stop order is executed at the next available rate depending on liquidity.

 

How to Activate a Trailing Stop?

Open a position and right click on the order at your trade on the chart or in the Trade tab of the MT4 Terminal window, and choose "Trailing stop ->" and then select in the drop-down menu how many Points your Trailing Stop shall be! As a reference: 15 Points equal 1.5 Pips.

 

Whiteboard Illustration:

1. Opening a Buy Order! 2. A trailing stop is being activated and moving the stop loss of our position after the price. 3. The price is starting to decrease and going against our Buy position; the stop loss is remaining unchanged. 4. The price is going up again, and the trailing stop order is moving after it. 5. The price has reached maximum and started down; the stop loss is remaining unchanged. 6. The stop loss has triggered, not allowing us to lose profits obtained previously.

 

The trailing stop is an insurance in case when the price will turn around and go against you.

 

The trailing stop always watches over the price and moves the stop loss towards the price moving in your direction. The trailing stop will close your order in profit (provided that the specified level in points has been achieved when putting the trailing stop), if the price goes against your position.