The forex market, as the largest financial market in the world, facilitates transactions worth several trillion dollars daily. Engaging in this market without a clear understanding of how to place orders correctly can be highly risky. Familiarity with different order placement methods not only helps traders execute their trades with greater precision but also ensures they don’t miss out on profitable opportunities while minimizing trading risks.
Types of Orders in Forex
In forex trading, orders are generally categorized into two main types: Market Orders and Pending Orders, each with its own characteristics and use cases.
Market Orders
A Market Order is used when a trader wants to enter a trade immediately at the current market price. With this type of order, execution happens instantly at the best available price.
Buy Market Order
In this type of order, the trader purchases an asset at the current market price. The buying price is typically equal to the Ask Price, which is set by sellers and displayed on the trading platform. This order is ideal for traders who anticipate a price increase and want to enter a buy position without delay.
Sell Market Order
With this type of order, the trader sells an asset at the current market price. The selling price is usually equal to the Bid Price, which is offered by buyers. This order is suitable for traders who wish to exit a trade immediately or take advantage of a price drop.
Key Points About Market Orders
- These orders are ideal for traders who want to enter the market quickly without delay.
- In highly volatile conditions, the executed price may differ slightly from the price seen at the time of order placement. This phenomenon is known as Slippage.
- Market orders generally execute faster and with minimal slippage in high liquidity markets, such as major forex pairs.
- Using market orders effectively enables traders to capitalize on real time trading opportunities and respond swiftly to price changes.
Pending Orders
Pending orders are suitable when a trader wants to buy or sell at a price different from the current market rate. Unlike market orders, which execute immediately, these orders are activated only when the market price reaches the level specified by the trader. Using pending orders helps traders execute their trades based on technical analysis without the need for constant market monitoring.
Pending orders are divided into four main types, each used for specific market conditions:
1. Buy Limit – Buying at a price lower than the current market rate
This type of order is set when a trader expects the price to decline to a specific level and then rise again. In other words, when the market price is above the specified level, the order remains inactive. However, if the price reaches the specified level, the buy order is automatically executed. This order is typically placed near strong support levels, where the probability of a price rebound is high.
2. Sell Limit – Selling at a price higher than the current market rate
This order is suitable when a trader predicts that the price will rise to a certain level and then start declining. A Sell Limit order is set above the current market price and is activated only when the price reaches the predetermined level. This strategy is often used near resistance levels, where traders expect the price to decrease after reaching that point.
3. Buy Stop – Buying at a price higher than the current market rate
This order is used when a trader expects the price to continue its upward trend after surpassing a certain level. In this case, the trader sets a buy order above the current market price, and once the price reaches that level, the order is executed. This method is commonly used in breakout strategies, where the trader aims to enter a buy position when resistance is broken.
4. Sell Stop – Selling at a price lower than the current market rate
This order is used when a trader anticipates that the price will continue declining after breaking a specific level. The trader sets a sell order below the current price, and once the market reaches that level, the order is automatically executed. This approach is often applied in breakdown scenarios and for continuing downward trends.
Difference Between Limit and Stop Orders
The key difference between Limit and Stop orders lies in their intended use. Limit orders are suitable when a trader expects the price to reverse after reaching a certain level. For example, if the price of an asset is declining and the trader believes it will rise again after hitting a certain point, they would use a Buy Limit order.
Conversely, Stop orders are used when a trader anticipates that the price will continue moving in the same direction after surpassing a specific level. For instance, if the price of an asset is increasing and the trader believes it will continue to rise further once it breaks a certain level, they would place a Buy Stop order.
The choice of order type depends on the trader’s trading strategy, and understanding these concepts correctly can significantly impact success in the forex market.
How to Place an Order in MetaTrader 4 and 5
To place an order in the MetaTrader platform, follow these steps:
- Open the MetaTrader platform and select the “Tools” option from the toolbar. Then, click on “New Order” to open the order placement window.
- In the new window, first select the currency pair or asset you want to trade.
- Next, determine the order type. If you want to execute the trade immediately at the current market price, select “Market Execution”. However, if you want to place an order at a specific price in the future, choose “Pending Order” and specify its type.
- If you have selected a pending order, you must choose between Limit or Stop orders and specify the price level at which the trade should be executed.
- Then, adjust the trade volume (Lot Size) according to your risk management strategy.
- To control risk, you can set a Stop Loss (SL) and Take Profit (TP), so that your trade closes automatically at the predetermined price levels.
- Finally, after reviewing all the order details carefully, click on “Place” to submit your order to the market.
By following these steps, you can efficiently place your orders in MetaTrader and manage your trades professionally.
How to Create and Set Pending Orders in Meta Trader
Pending Orders in Meta Trader allow traders to set up orders at a price different from the current market rate so that they are executed automatically when the price reaches the specified level. Follow these steps to create and set up Pending Orders in MetaTrader:
1. Open the new order window
Launch the MetaTrader platform and select “New Order” from the toolbar at the top of the screen. You can also use the F9 shortcut key to open this window.
2. Select the currency pair or asset
In the “Symbol” section, choose the currency pair you wish to trade.
3. Choose “Pending Order” as the order type
In the “Type” section, select “Pending Order”.
4. Select the type of pending order
At this stage, you need to specify the order type based on your trading strategy. The available options include:
- Buy Limit: Used when you want to place a buy order at a price lower than the current market rate.
- Sell Limit: Used when you want to place a sell order at a price higher than the current market rate.
- Buy Stop: Used when you anticipate that the price will increase further after surpassing a certain level.
- Sell Stop: Used when you expect the price to decline further after breaking a specific level.
5. Set the desired price for order execution
In the “Price” section, enter the price level at which your order should be executed. The order will only be triggered when the market price reaches this level.
6. Set trade volume (Lot Size)
In the “Volume” section, specify the trade size. Choosing an appropriate lot size is crucial for risk management.
7. Define Stop Loss (SL) and Take Profit (TP)
To control risk and manage your trade efficiently, you can set a Stop Loss (SL) and Take Profit (TP) to ensure your order closes automatically once these levels are reached.
8. Set expiration time (if needed)
If you want your order to expire after a specific period, activate the “Expiry” option and set the expiration date and time.
9. Place the order
After carefully reviewing the order details, click on “Place” to submit your pending order to the active order list.
By using Pending Orders, you can manage your trades strategically and take advantage of market opportunities without the need for continuous monitoring.
Order Management and Key Tips in Forex Trading
Order management is one of the most crucial aspects of success in the forex market. Without a proper management strategy, even the best analyses cannot prevent potential losses. Below, we review key tips for better order control and risk reduction in trading:
1. Using Stop Loss to Reduce Risk
One of the most important principles of risk management is setting a Stop Loss (SL) for every trade. A stop loss is a price level at which, if the market reaches it, the trade is automatically closed to prevent further losses. Setting an appropriate stop loss helps traders avoid emotional and impulsive decisions and keep their losses under control.
- The stop loss should be determined based on market volatility, support and resistance levels, and the trading strategy.
- It is advisable to maintain a Risk/Reward Ratio. For example, if your stop loss is 30 pips, your take profit should be at least 60 pips (a 1:2 ratio).
- Use a Trailing Stop so that if the price moves in a favorable direction, your stop loss is automatically adjusted to secure potential profits.
2. Determining Trade Volume (Lot Size) Based on Capital Management
Choosing the right trade volume is one of the most critical factors in risk control. Lot Size determines how each price change impacts your account balance.
- Adjust the trade volume according to your capital, risk tolerance, and trading strategy.
- It is generally recommended that you risk no more than 1 to 2% of your total capital per trade.
- Before entering a trade, calculate the potential loss based on the selected lot size to avoid making impulsive decisions.
3. Conducting Technical and Fundamental Analysis Before Placing Orders
Before opening a trading position, it is essential to conduct the necessary analysis to identify precise entry and exit points.
- Technical analysis involves examining charts, identifying price patterns, using indicators (such as RSI, MACD, Moving Averages), and determining support and resistance levels.
- Fundamental analysis includes reviewing economic news, global events, and economic indicators (such as interest rates, inflation, GDP) and assessing their impact on the market.
- Combining both technical and fundamental analysis can lead to more accurate decision making for traders.
4. Practicing on a Demo Account Before Entering Live Trades
One of the best ways to familiarize yourself with order placement and trade execution is by using a demo account. A demo account allows you to practice in real market conditions without financial risk and test various trading strategies.
- With a demo account, you can practice placing orders, setting stop loss and take profit levels, using technical analysis tools, and managing emotions in trading.
- Before switching to a real account, ensure that your trading strategy has been tested in different market conditions and has shown satisfactory performance.
- Even after entering the live market, a demo account can be used to test new strategies without risking actual capital.
Order management in forex trading is highly important and can have a direct impact on a trader’s success. Using an appropriate stop loss, determining trade volume based on capital management, conducting thorough analysis before placing trades, and practicing on a demo account are among the most essential tips for reducing risk and increasing profitability in trading. By following these principles, traders can maintain better control over their trades and avoid impulsive and high risk decisions.