Concise Guide to Types of Forex Trading Orders
By Space Coast Daily // July 3, 2020
Since you are here, it’s undoubtedly because you heard about Forex and are enticed by it. So let us help you by taking a closer look at types of trading orders and advantages of FX currency pairs, which are important to understand in order to make money on this market.
On the Forex market, financial instruments are presented in the form of currency pairs. Each trading operation involves purchasing one currency and the sale of another currency at the same time.
By buying a currency pair, the trader buys the base currency and sells the quote currency. It is an essential mechanism of Forex trading.
For example, if a trader buys the EUR / USD pair, this means that he is buying the euro and selling the dollar at the same time.
In this case, the forex trader anticipates an increase in the price of the euro against the dollar or a fall in the price of the dollar against the euro.
By closing the buying position, the trader will buy the dollar and sell the euro. In practice, all this is done with a single click on the trading platform.
On the other hand, selling EUR / USD means selling the euro and buying the dollar.
It is not necessary to hold a specific currency to buy or sell it. With a trading account in euros, for example, you can buy and sell any currency pair. Again, everything happens automatically with a single click.
There are no special requirements to enter Forex trading. Unlike the stock market, which requires a lot of capital, online forex trading can be tackled with just a few hundred dollars.
Types of Forex Trading orders
■ Market buy order: buy a currency pair at the current market price
■ Market sell order: sell a currency pair at the current market price
■ Buy Limit Pending Order: Automatically buy a currency pair at a price lower than the current price
■ Buy Stop Pending Order: Automatically buy a currency pair at a higher rate than the current one
■ Sell Limit Pending Order: Automatically sell a currency pair at a higher rate than the current one.
■ Sell Stop Pending Order: Automatically sells a currency pair at a lower rate than the current one.
There are also two market orders for the novice Forex traders:
Stop Loss Order: allows you to close a loss position at a specific level automatically. The trader can set his maximum loss in advance before entering the position with the stop-loss.
Take Profit order: It allows you to close a winning position and automatically take profits if a specific price is reached.
Advantages of Trading on the Currency Market
Trading currencies has various advantages:
The forex market is non-stop open, 24 hours a day, from Sunday at 11 p.m. to Friday at 10 p.m. It’s possible to trade outside of regular working hours and at night.
The currency market is the largest in terms of traded volumes and offers deep liquidity, which makes it easy to open, close, and quickly enter and exit the market.
Significant leverage is available in this market. Forex brokers offer different leverage effects. It is imperative that the leverage is controlled by the trader because it amplifies the gains and risks.
Forex trading is very accessible. Anyone willing to devote time and energy to learning trading can start trading with just an internet connection and a computer.
Currency trading is “macro-economic” trading. If you love the economy and have an understanding of how economies grow, Forex is the market you need to trade. Trading currency pairs is like comparing two economies.
Since Forex is a huge market, it is almost impossible to manipulate it.
The disadvantages of trading on the forex market are not as numerous, but they are very important because it should not be forgotten that you can lose your capital in this market.
The main risk of forex trading comes from the inappropriate use of leverage. Using too much leverage certainly leads to failure. Learning to trade may be a critical preliminary step before you start trading.
By following some trading training, you can start to take control of your trading platform on a demo trading account to put it into practice without risk. Indeed, it is by forging that one becomes a blacksmith.
Demo trading can be beneficial, especially for rookies, because during this process, you can analyze your skills and see how your trading strategy can be improved. By trading a lot, you can identify the best time to enter, the best currency pairs, and the most winning trading strategy for you.
Once you are confident enough in your trading skills, you can open a real trading account.
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