Types Of Trade Orders - Definitions And Practical Examples

Different types of trade orders exist to determine how and when a trader enters or exits a trading position while trading different products in the financial markets. Trade Orders give traders the flexibility to determine the price at which they want to enter a trade rather than just buying and selling at the prevailing market price.Brokers can have different order requirements; therefore, it is advisable to check with your broker which types of forex orders they accept.
Types of Trade Orders
1.Market Orders
This the most basic type of trade order. It allows you to buy or sell a currency pair at the prevailing market price simply by clicking a Sell or Buybutton on your trading platform. Market orders are the easiest and the quickest way to enter a trade. When you place a market order, it is executed and filled at the current market price. For example, assume the EUR/USD pair is currently at the market price of 1.3150/ 1.3152. If you want to sell EUR/USD at the current price, just hit the sell button on the platform and your order will be filled at 1.3150.Sometimes there may be order slippage depending on execution speed and market volatility. Slippage describes when there is a slight difference between the final price at which your order is executed on your trading platform and the price you selected. For this reason, it is important that your broker offers ultra-fast execution times. .
2.Stop-Loss Order
A stop-loss order is a trade order placed to protect a trader's position by limiting losses when the price turns against them. You place a stop-loss order at a specified price where you will be willing to sell or buy at a loss to cut out further losses.If you use it in a long position, it is a sell-stop order. When you are in a short position it is a buy-stop order. It will remain effective until it is cancelled, or the position is filled. Assume, you went long on a product at $25.00 expecting its price to rise, but your prediction was wrong, and the price fell to $22.00. If you had placed a stop-loss order at $24.50, your order would have been automatically executed at that price and close out the trade, protecting you from the further $2.50 loss.
3.Limit Entry Order
This trade order is placed to buy or sell a product at a specific set price or better. It ensures that you buy or sell at the price that you want. It will not execute until the price is in line with the limit order price. Traders use limit entry orders when they believe that price will reverse upon hitting their specified entry price. Limit orders come in two types: buy limit orders and sell limit orders.
Buy Limit Order
A buy limit order is used to specify the price at which you want to buy. For example, a stock is trading at $25 and you set a buy limit order to purchase 500 shares when the price of the stock drops to $24, meaning that you are not willing to pay more than $24 per share. Your trade will only execute when the stock price hits $24 or lower.
Sell Limit Order
A sell limit order is placed to specify that you are not willing to sell a product below a specified price. Consider a stock that is currently trading at $20 per share. If you place a sell limit order to short 1000 shares at $21, your order will only execute when the price hits $21 or higher per share.
4.Stop Entry Order
You place a stop entry trade order so that your trading platform will fill your trade automatically when the market favours your prediction. You can place a stop entry order to sell below the market price or buy above the market price. Assume EUR/JPY is currently priced at 1.2050 and the price is rising. You predict that if the price reaches 1.2070, then it will continue to rise. So instead of staying glued on your laptop screen and waiting to click the buy button when the price gets to 1.2070, you can place a stop entry order at 1.2070 and enter the market at the desired price.
5.Trailing Stop Order
Trailing stop orders are a special type of a stop-loss order that trails with price fluctuation. Instead of being set at an absolute amount, the stop-loss price is at a certain percentage. If the price moves up, the stop-loss order trails along with it. When the price stops rising, the trailing stop remains fixed at the new level that was dragged to, enabling a trader to lock in more gains while minimising losses.For example, you buy a stock at the market price of $20.00 and you do not want to lose more than 5% of your investment if the price turns against you. Placing a trailing stop order will alert your broker to fill your trade at $19.00 (5% below the market price).But if the price keeps on rising, you want to lock in more profit. So, if the price rises to $30.00, the trailing stop order comes along with it and a sell trigger will only be activated when the price falls below 5% of $30.00. That means your order will be filled at $28.50, enabling you to lock in more profit.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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