Types of Forex Market Orders
What are the types of market orders?
- Market Order
- Limit Order
- Stop Order
- One Cancels the Other (OCO)
- Cancel and Replace
A Market order is given to the broker to buy or sell at whatever price the market is trading for at that moment. It may be an order to buy or an order to sell according to how the market is doing. Forex traders use these market Orders to determine whether they should enter the market (buy) or get out (sell).
Caution: If you are in a fast-paced market, be careful about using Market Orders.
When the market is unstable, such as a sudden increase or reaction to a falling market, you may gain or lose points
Market trading can be compared to an auction, there are buyers and sellers. When you bid, you buy and when you ask, you sell. When slippage occurs it refers to what happens in the interval between *when the agreement is reached between buyer and seller and changes in the market before the deal is finalized. You may gain or lose in this period; the average is a one to six ratio with market orders.
You need to be careful buying and selling with Market Orders according to the advice on this website, Trading Home Business.com.
When you buy at a certain price it will likely change before the order is filled.
- Sellers want a high price
- Buyers want a low price.
- Trading is the same as an auction.
- Prices can slip
Limit orders refer to the orders given to a broker to buy or sell at a certain price or better. These orders will be to sell at a minimum price or more if possible. If you buy, it will be at this set price or less. Limit orders mean exactly that in that the broker is order to sell or buy at the specified price or a better price.
These Limit orders are used in order to enter or exit the market. It is generally used to get a certain price, avoid slippage in the market, and execution price, which is common when it comes to Market orders. Sometimes brokers don’t like Limit orders because a fast moving market will move through their price before they can execute.
Limit Order refers to selling above the market or buying below market price. As soon as the market trades through it, a Limit Order will be executed.
If the market is trading at the Limit Order you specify, it will go through about seventy to ninety percent of the time. To ensure a fill, the market must use your Limit Order number to trade. With trading software, you will be informed within seconds, eliminating the need to call a broker to find out if the trade was filled.
A Stop Order tells when to enter or exit the market at a price you specify. If current market price is above or below your stop price the order is called a Stop Order. When the market hits your Stop Order it immediately becomes a Market Order. Both market Orders and Stop Orders are affected by slippage; Limit Orders on the other hand are not affected.
Most Stop Orders serve as Stop Loss orders. These orders are set up to exit the market if it goes against your wishes. The Stop Loss Order is essential to experienced traders. These orders will ensure you get out of the market if your trade has gone bad.
One Cancels the Other (OCO)
OCO stands for one cancels the other when entering and exiting the market. When you enter the market and set a target for expected profits, use a protective Stop Loss Order. This expected profit target will be the Limit Order.
If you set your Limit and Stop Loss Orders as soon as you get into the market, you will be able to OCO them, in other words one cancels the other. You will not have to watch them as one or the other of these orders will activate and cancel the other one.
If you are confident with a trade, you can enact the OCO and not worry about it. The trade will be taken care of by the trading software.
A Cancel/Replace Order happens when a trader cancels his order and replaces it with a new order. This is a strategy used by experienced traders wanting to stay in the market.
Let us say you buy at 1.410 and set a Stop Loss Order at 1.390. The market goes your way, as you believed it would. You want to make sure you do not lose on this trade so you cancel the 1.390 Stop Order and change it to 1.410, which is where it was when you bought into it. You are now at no risk of losing. If the market continues to go up you can again cancel and change the Stop Loss Order to 1440. You have already made some profit here and are at no risk to lose in this particular trade. You can continue to cancel and change the Stop Loss order until the end.