Blog

How to Place a Forex Trade 101

How to Place a Forex Trade 101

Now to the fun part.

Let’s have a go at placing a trade or an order.

In the picture below, you’ve got a trade ticket and you want to buy USDJPY.

On the ticket, there is something called Market Execution. This means that your trade will be immediately executed at the current market price or best price available.

Click the button Buy by Market and your order is complete. Keep in mind there is no chance for you to try to get a better price than what is currently available. You buy it at the current market price and it’s instantly executed.

Confidence

How to Place a Pending or Limit Order

What if you don’t want to buy it at the current price and want a better price?

Let’s say you want to buy at 109.15 instead of 109.21. That wouldn’t be a market order as it wouldn’t be instant.

It would be a Pending Order with a limit or a maximum price of 109.15.

That’s a Limit Order because it’s better than the current market price and that’s the limit to what you’re willing to pay. It’s pending because it will only be executed if the market actually falls to 109.15 and triggers the price.

You can create this limit order on the MT4 or whatever trading platform you are currently using. You can even decide how long you want to leave this order open by setting a time and a date of expiry.

You shouldn’t place limit orders simply because you want to buy at a cheaper and better price. That’s not how it works.

You’re placing a limit order because you’ve done some research and it’s told you that the market will turn at 109.15. Limit orders are specifically used for that reason. They’re very useful tools so that you don’t miss that trade opportunity you’ve analysed and are waiting to execute it.

Of course, limit orders are not restricted to just buying. You can also have a sell limit order.

Confidence

The image above shows what this would look like on a chart. The green line represents the price going up and the red line is the current market price. So you placed a market order that has been instantly executed and you are in at 109.21. You also have the dotted line, which shows a limit order with a price that is better than the current price. This limit order has not actually been executed yet.

Stop Loss

Confidence

The other type of order that traders use very often is called a Stop Loss.

For example, if you did not place a trade and you are waiting for the price to fall to 109.15, you would then want to attach an order to that order, which is called a stop loss order, to limit the potential of a loss.

In this example, you set the stop loss at 105.00. What this means is that if the market were to fall instead of move up as you’d like it to, it would trigger at 105.00 and your trading platform would automatically sell, close your trading position and stop you from losing any more money.

The stop loss order is seen as a very important and good way to manage your risk. If you attach a stop loss order to your trades, you know exactly how much money you’re going to lose.

Trailing Stops

Confidence

As the name suggests, a Trailing Stop is one that trails behind your trade.

If you bought it at 109.15 and placed a trailing stop at 100 pips, then the stop loss would move up every time the price moves up.

As the image suggests, just as you bought, prices moved up. So the trailing stop would move up to 100 pips away from where the current market prices are. Most importantly, it will never move down if the market moves down against you.

Confidence

Now the stop has moved up because prices moved up. Since the price has moved up to 112.00, your trailing stop would move up to 111.00 or 100 pips behind.

If the market decides to fall, your trailing stop will remain where it is at 111.00. It kind of locks in your profits. If the market continued to fall and triggered the price at 111.00, then the order would be executed automatically, closing your trade.

Buy Stops

Confidence

The Buy Stop order is similar to a buy limit order, but this time, instead of trying to get a better price than what the market is offering, you try to get a worse price.

For example, you want to buy at 115.00 but the market is at 109.00. Your analysis suggests that the price is about to break 109.00 and, if it does, then there is no stopping it. For this reason, you place the buy stop order at 115.00 with the confidence that the market will rally past 115.00.

Good Till Cancel Orders

As its name implies, Good Till Cancel order is good until you cancel it. It will stay on your account until you actually manually go in there and cancel it, so it doesn’t have an expiry date.

One Cancels Other (OCO) Order or Take Profit Order

Confidence

One Cancels Other (OCO) is another type of order.

Let’s say you’ve bought USDJPY at a certain price, you placed the stop order below your traded price, and you’ve got your risk under control.

You know that if the trade goes wrong, you’re risking a substantial amount of pips. To your benefit, you might also want to place an OCO or Take Profit limit order to secure your profit.

So that’s where OCO comes in. One order cancels the other and it cleans up any unwanted orders left behind.

Of course, if the market went against you, came down and the stop loss was triggered, the stop loss order would have taken money from your account. You don’t want to have an order sitting up there that you completely forgot about, so those get automatically removed with an OCO in place.

It’s always a good idea to get into the habit of attaching a stop and a limit to every single trade that you make to have a good idea of how much you’re risking and how much you’re going to profit.

Good for Today Order

Another type of order is the Good for Today order, which is for traders who forget they might have 30 to 40 orders in their trading account which haven’t been closed.

Have a go on a demo account, placing some of these orders.

You might still be learning, so use this opportunity to get a good understanding of the different types of orders that are freely available to you on your trading platform.

To check out a list of all of our ongoing promotions and offers, have a look at our website here.


*Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.


Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital. Show Less

risk Show More

Get Started

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

Get Started