When trading forex and other CFDs (Contract for Difference) an order simply refers to a request sent to your broker through the trading platform to buy or sell a financial instrument.
These order types fall into two main categories, market orders, and pending orders. Below we will look at some of the different basic order types available in the MT4 platform.
Market orders are requests to buy or sell immediately at the best available current market price. When trading in the MT4 platform, through the New Order window or if you prefer straight from the chart via the One-Click Trading, you can place a market order to Buy or Sell a particular asset.
For example, a trader who considers that the price of an instrument will rise can place a Buy position at the current market price.
Pending orders are requests to buy or sell an asset if a price of his/her choice is reached sometime in the future. If the pre-determined price set by the trader is reached, then the trade will be opened. Otherwise, the pending order will remain open more often than not until it’s manually canceled by the trader. Amongst these types of pending orders are the Buy Stop and Sell Stop and the Buy Limit and Sell Limit which is all available to all traders in the MetaTrader 4 (MT4) platform under the New Order window by selecting the order Type as Pending order.
It’s worth noting that if the platform is closed, both Buy Stop/Sell Stop and Buy Limit/Sell Limit positions are stored on the server and will therefore remain active until triggered or deleted.
Buy Stop and Sell Stop:
The Buy Stop is a pending order instructing the broker to buy if the price increases in the future For example, a trader believes that if the price increases to a certain level, then it’s time to Buy. To ensure they can enter the trading arena no matter if it’s day or night, the trader places a Buy Stop order.
Once the desired price is reached, the Buy Stop order will be triggered and become a Buy order.
The Sell Stop is a pending order instructing the broker to sell if the price decreases in the future. For example, a trader believes that if the price decreases to a certain level, then it’s time to sell. To ensure they can enter the trading arena no matter if it’s day or night, the trader places a Sell Stop order. Once the desired price is reached, the Sell Stop order will be triggered and become a Sell order.
The Sell Limit is a pending order instructing the broker to Sell if the price increases sometime in the future. For the Sell Limit to be accepted, the triggering price must be higher than the current market value. A trader considering selling an asset if its price increases, because after the price will decrease resulting in a potential profit will place a Sell Limit. Once the desired price is reached, the Sell Limit will be triggered and become a Sell order.
Now that you’ve learned about pending orders, we invite you to join us in exploring some of the most overlooked risk management tools – Stop Loss, Take Profit, and the Trailing Stop.
If you are new to Forex trading, or unfamiliar with some of these order types, click here to test your knowledge and experience firsthand in a risk-free demo environment.