How to place a trade
Probably one of the most confusing and scary parts in forex trading for beginners.
Mainly because no forex trader wants to mess it up because you can lose money.
However, in this industry, like understanding to ride a bike – you have to fall off once and a while to get better.
We promise you that this will become second nature in no time.
There are several types of orders you must be aware of:
Market Execution (Instant)
This is where you buy or sell at whatever the price is now. You would use this if you want to enter a trade immediately. Once you press the button, the order will be processed by best execution and you will be active in your trade. This is one of the most common forms of entry in forex trading.
Stop Loss Order
A stop loss order is an attached order to an open position. It is a completely separate order and will ONLY execute when the price reaches that level. The stop-loss order is used to reduce risk and take a trader out of their open position when it is a losing position. All of this can be predefined and managed whilst the trade is active using technical analysis such as support and resistance levels.
It is common practice to move the stop loss when you are in profit.
Take Profit Order
Similar to the stop loss order, but instead of taking you out when you are in a losing position, this order will only execute when the trade is profitable.
These are useful if you want to open a trade and walk away from the computer or go and focus on another asset in the meantime.
Pending Orders:
These orders are very confusing for beginners and even some experienced traders who forget from time to time.
The beauty of pending orders is that if you have performed the technical analysis you can set up a pending order to capture the trading opportunity in the future.
Kind of like setting a trap in the market and you are waiting for the market to trigger it. These trades will then open and execute your pending order.
This is the confusing part.
There are 4 different types of pending orders to understand, these are:
This is when the market is currently trading ABOVE the price that you want. The buy limit is used when you are looking to buy off a support level or something similar.
For example, if the market is at 1.1320 and you wanted to buy EURUSD at 1.1310 – you would use the Buy Limit Order
Sell Limit
This is when the market is currently trading BELOW the price that you want. The sell limit is used when you are looking to sell off a resistance level or something similar.
For example, if the market is at 1.1320 and you wanted to sell EURUSD at 1.1330 – you would use the Sell Limit Order
Buy Stop
This is when the market is currently trading BELOW the price that you want. The buy stop is used when you are looking to buy off a resistance level or something similar.
For example, if the market is at 1.1320 and you wanted to buy EURUSD at 1.1330 – you would use the Buy Stop Order
Sell Stop
This is when the market is currently trading ABOVE the price that you want. The sell stop is used when you are looking to sell off a support level or something similar.
For example, if the market is at 1.1320 and you wanted to buy EURUSD at 1.1310 – you would use the Sell Stop Order
So, let’s look at an order ticket based on the MT4 Platform.
The Order Ticket
Market Execution Ticket
1 – Tick Chart – The tick chart is not that fundamental – it’s just there to show you the price movements graphically. The only time you need to really review this is if you are waiting to get a certain price or you are scalping on ticks.
2 – Symbol – This is the currency you want to trade. Here the EURUSD is selected.
3 – Volume – This is the lot size you wish to trade with.
- = 1 lot = 100,000 units. 0.1 = 1 mini lot = 10,000 units. 0.01 = 1 micro lot = 1,000 units.
4 – Stop Loss and Take Profit – here you can input your stop loss and take profit order.
5 – Type – Type is the order type, whether it is a market execution or a pending order.
6 – Market Execution – Here you can either buy or sell at market (instantly).
The above shows a standard order ticket found in MT4.
Pending Order Ticket
Here we will just go through the major changes instead of repeating ourselves.
The type has now changed to Pending Order
This has changed the ticket and now we can select the type of pending order we’d like.
Price is the level we want to set the pending order to execute automatically
Expiry is when you want the pending order to delete itself only IF the trade hasn’t been executed. You can set this for as long as you want.
Expiry is particularly good for day traders who want to close out all positions by the end of the day. They can do this automatically through this feature.