The word “order” was previously mentioned. What is an “order” when we talk of forex trading? In the foreign exchange market, “order” is a term which refers to how a trader enters or exits a trade. Orders come in different types. Orders are made in relation to a broker. It is a command you give for your broker to do. Different brokers take different types of orders and it is therefore important that you know what you are ordering from them. Order types are classified as basic and others are in acronyms. The basic ones are Market Order, Limit Order and Stop-loss order, and the others are GTC (Good ‘til canceled), GFD (Good for the Day), and OCO (Orders Cancels Other).
The basic type “market order” is an order to buy or sell currency at the market price. For instance, you will BUY EUR/USD, which is currently at 1.25. As mentioned earlier, the format of the forex trading via the Internet is very user-friendly and would only need one click to close transactions. All the trader needs to do then is to click on the “buy” icon, which will be clearly indicated on the computer’s screen and a buy order will already be executed at the exact price that is indicated on your screens.
The “limit order” is an order placed by the trader to buy or sell at a specific price. The order specifies the price at which you wish to buy or sell a specific currency and also how long the order should remain active.
The “stop-loss order” is similar to a limit order but linked to an open trade. Purpose of this is to avoid unexpected losses in case price goes up beyond expectations. A stop-loss order remains until position is liquidated or until you cancel the stop-loss order.
As for the orders, a “GTC order” will remain active in the market until such time that you decide to cancel it. Your broker will not do it for you at any time. So it is your lookout to remember you have the order scheduled. A “GFD order” is an order that stays active until the trading day ends. It means that it stays until 5:00 pm EST, which is the close of the U.S. market. An “OCO order” is a combination of two limit orders and/or step-loss orders. Trader places two orders with price and duration variables above and below the current price. When one of the orders is executed, the other order is automatically canceled.
It is recommended that you always check with your broker for specific order details and information. Find out if there are any rollover fees in case a position is held longer for one day. Keep your order rules simple and clear. Make sure you fully understand your broker’s order entry system before finalizing a trade.
It would be noteworthy that the basic order types are usually the used ones and would be the only ones the trader would eventually need. It would be easier and less complicated to stick to the basic until you have already become a veteran in the business. This will not only be making your life simpler; it would also lessen your risk if you do not get too fancy with your orders.
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