Order Types and Specifications
Twentieth session of Forex Training
Welcome to Forex professional training in financial market.
In this session we will talk about order types and specifications, profit and loss amount, pending orders, changing orders and closing orders.
Instant Execution
Orders can be classified into two types on the basis of their execution method: Instant execution and Market execution.
If a broker provides Instant execution orders, if a trader wants to order a trade on a symbol in an exact price, then a broker MUST place that order exactly on the trader’s desired price.
If an order cannot be taken a broker may ask a trader whether he/she would prefer to open his/her order at another adjacent price.
If a broker does not provide Instant orders, but a trader asks to open an order on exact price, if order cannot be placed on the favoured price, a broker has authority to open that order in a close price to that desired price.
Buy and sell in Instant execution is called as it is, without any change, however, in Market Execution it is called “Buy by market” and “Sell by market”.
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Take Profit
Take profit or profit amount, abbreviated to TP, is a limit you set on an order, which you accept if the market price meets your target price.
Essentially, if price meets your take-profit limit, then the order will be closed automatically.
Naturally, on a buy order, take-profit price must be more than the current price.
On the contrary, in a sell position a trader must place the take-profit price less than current price.
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Stop Loss
Stop loss or loss amount, abbreviated to SL, is the price you choose to limit the loss if market goes opposite to your prediction in an order.
In a Buy order SL is lower than the current price, however, in a Sell order SL must be a higher price than the current price.
SL is highly recommended especially in a volatile market or on the weekend when there would be a huge gap between Friday to Monday prices.
The gap volume can be anywhere between 10 and 200 pips.
Guarantee
Some brokers like ICMBrokers may guarantee to execute SL and TP prices during the market working days (not including the gap between Friday and Monday), so your order would be closed automatically as soon as SL or TP are meet by a market price.
Guarantee is extremely important for parties who trade on gold, oil, and stocks.
Deviation
When market price fluctuates extremely, a trader cannot open or close an order at the exact desired amount, thus price change or re-quote happens.
To allow a broker to close or open an order in an approximate amount close to desired price, a trader should enable the quoted price in Order Window.
This option is available on a brokers which provide Instant Execution order.
Brokers, who represents Market Execution orders, have already applied this option on all orders.
Order Window
A trader can open Order window in various ways, while the easiest one is to press on New Order button on the top toolbar or by pressing F9 as a keyboard shortcut.
Symbol can be chosen in the first field, where only active symbols provided by a broker are listed.
For instance, EURUSD_Ask is not tradable on FXOpen broker since this broker represents both EURUSD and EURUSD-Ask symbols.
On Market Watch, both symbols are displayed, if a trader keeps pointer on each symbol without any movement, a box appears with some details on that symbol.
“No” in front of Trade option means it is not a tradable symbol in this broker. So EURUSD is the tradable symbol in FXOpen.
After opening New Order window, if user changes the chart to GBPUSD then brings up EURUSD_Ask chart, GBPUSD symbol is filled in Symbol box automatically.
It is imperative to select a tradable symbol in Order window.
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Volume desired by a trader must be considered in the next box.
Comment box is beneficial for the future if a trader would like to regain the information or justification for this trade.
As FXOpen does not present Instant execution orders, the Sell/Buy buttons are “Sell by Market” and “Buy by Market”.
This means that a broker does not guarantee that your order would open on your exact desired price, but a close available market price would be chosen by a broker automatically.
For instance, a Sell order is selected in addition to previous Sell order that can be viewed if prior timeframe is chosen.
A trader can simply choose Buy option by pressing “Buy by Market” button.
Traders can apply for an account in a broker which provides Instant execution, such as FXPro.
When New Order button is chosen SL and TP fields are active for user-define digits.
Trader can press on Up/Down button of these fields, so that MT4 will enter the current price automatically.
Order type is displayed in a Type field. Trader can select Sell or Buy button on the basis of his/her predictions.
To remove Price Change or Re-quote situation on a volatile market, user can enable the “Enable maximum deviation from quoted price” check box.
Maximum deviation shows the rate of pips which a broker can consider on an order on a volatile market; for example, it can be 4 or 10 pips, based on a trader’s permission.
For instance, a Sell order is chosen on EURUSD symbol with 0.1 lot.
Although TP can be entered manually, it would be more appropriate to determine TP digits by Up/Down button.
For a Sell order TP, it must be lower than the current price, so in this example a trader has to decrease TP amount.
On the next step by pressing the Sell button, a Sell order is placed on EURUSD with specified TP price.
In the recent MT4 platforms, a trader can select, modify, and delete the TP or SL price; furthermore, these can be easily relocated on the chart.
Traders must consider that there are huge differences between Demo and Real accounts provided by the same broker.
Most brokers represent lower commission and spread with faster platform response service in Demo accounts than in Real accounts.
An excellent service in Demo account does not imply a satisfactory Real account function.
Pending order
Pending Orders can be classified by Limit and Stop orders.
Buy Limit order should be placed when a trader speculates that market trend will rise after it touches a certain price (entry price) lower than current price on a downward trend.
So Buy Limit is ordered on a price lower than a current price with a forecast of upward trend.
Buy Stop orders are assigned on a higher price, when trader predicts that market price would go up to a certain amount followed by further increase.
Therefore, Buy Stop order must be placed on a price higher than a current price.
Sell Limit order should be placed when trader speculates that market trend will fall after it touches a certain price (entry price) higher than current price on an upward trend.
Trader can order Sell Limit at that price, so he/she must enter a price higher than a current price.
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Sell Stop orders are placed whenever further price reduction is anticipated by a trader after market price meets a certain lower price rather than current price.
Hence, a trader must select a lower price rather than current price for a Sell Stop order.
In conclusion, Limit orders must be placed on markets that may have direction change on a specified price while Stop orders indicates that a trader predicts there would be NO direction change of a market trend even after price reaches a significant level.
On each pending order, a trader can determine an expiry date on which order will be activated when price reaches the specified price.
An example clarifies the mentioned issue. A trader can open New Order window on a EURUSD symbol.
Type of order should be changed to Pending Order. A new option appears on an Order window.
In this example Buy Stop order is chosen so that the starting price must be higher than the current price.
A comment is displayed on the bottom of an Order window which reveals the minimum pips a trader must add to the current price to place a Buy Stop order.
It can be between 2 and 20 pips in Forex market, while in Commodity market the number of pips would normally be higher.
Considering that the current price in this example is 1.37221, the Buy Stop order price can be 1.37400.
After clicking the Place button, order will be submitted and it will be displayed on the chart in addition to its details. For instance, a trader expects that the price would go up, however, it would drop to a certain value before its upward movement.
So a Buy Limit order with the price of 1.37020 can be placed on EURUSD.
Based on trader’s predictions, market price would decline to a specified level followed by a rising trend towards a price higher than 1. 37400.
On GBPUSD symbol, a trader predicts a downward direction, so he/she can order a Sell Stop order with a price lower than current price minus 10 pips.
Price of 1.6790 can be inserted into Price box and Place button is pressed.
If a trader forecasts a small upward movement before decline trend, then he/she can place a Sell Limit order with the price at 1.6850.
Both orders are shown in the given chart. If Expiry date should be attached to any order, a trader should right-click on the preferred order.
Modify option from a menu should be selected, and in Order window the Expiry check box can be enabled.
Expiry date can be selected when a trader wants to place a new order or even in modification window of an earlier order.
Expiry date can be set with a certain hour, day, month, and year. The order with expiry date is active until the expiry date is reached.
Modify
Modification of orders can be applied on SL, TP, or expiry date of any order. The orders are listed on Trade tab of a Terminal window.
TP field of those orders with less than 10 pips to TP price will be in green colour, while SL fields of orders with less than 10 pips gap to SL price will become red.
Executed orders are categorized in a section while pending orders can be kept in another group.
For instance an executed Sell order can be modified through Modify or Delete Order option in right-click menu of given order.
In this example SL price is not applied by a trader. It can be entered manually or a trader can select the amount of gaps between current price and SL price from Level field.
The value in Level is represented in pipette units, so 100 points means 10 pips gap. So SL and TP prices can be changed via modification window.
They can be removed by selecting their amount followed by Backspace keyboard button and they will be removed from the certain order.
A trader can simply add SL and TP prices to any order in Trade tab through modification window. Modification of pending orders can be applied in the same way.
For example, on a Buy Stop order, trader can change Price, SL, TP, and Expiry date.
Pending orders can be deleted through modification window, otherwise a trader can apply the delete button located on the far right side of each order on Trade tab of Terminal window.
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Trailing Stop/Break Even
In a trade in which price moves toward TP point, a trader can place an option that SL price would become the starting price order.
This option is called Trailing Stop.
Trader should select Trailing Stop amount so that if price moves toward TP price at a higher rate, SL would be placed automatically on new price with Trailing Stop amount from current price.
Break Even is another option in which SL price can be relocated on the order price by a trader manually.
An example shows how to place Trailing Stop option on an order.
On Trade tab of Terminal window, trader can right-click on a certain symbol, and on Trailing Stop option any amount can be chosen.
In this example, Trailing Stop amount is set on 15 points.
This means whenever price moves 15 pipettes towards TP price, SL would become 15 pipettes away from current price.
So if market price goes down towards TP point, SL will become an order price and with further movement towards TP price, SL would relocate to the new price 15 pipettes away from the current price.
Normally, small Trailing Stop value would close an order abruptly since 15 pipette value is a small value that a market with normal fluctuation can reach in a short period of time.
This order is closed automatically as with a small oscillation, new SL price has been met. Another order can be placed with specified amount of TP and SL.
If a trader wants to enter higher point, Custom option should be selected and any preferred amount can be entered.
It should be considered that this value is in pipette so if a trader desires to choose 40 pips, then 400 pipette should be entered.
400 point Trailing Stop is a recommended amount on a market with normal fluctuation.
Closing Position
Orders can be closed entirely or partially. All active orders are shown in Terminal window. Some may have 0.1 while others have more volume.
For example a trader can close an order through modification window. An order can be closed completely by pressing Close button in modification window.
Also, an order can be partially closed by changing the volume of a given order in modification window.
In a 1 lot order, if a trader enters 0.2 lot in Volume field and clicks on Close button, only 0.2 lot will be deducted from the given order.
The remaining volume of that order is 0.8 lot. Partial closure of an order depends on the type of the account provided by broker.
For instance, volume provided by FXPro on each order is 0.1 lot, so a trader cannot reduce the volume to less than 0.1 lot, however, ICMBrokers provides volume of orders with 0.01 lot so that orders with 0.1 lot volume can be partly closed.
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Traders should take into consideration that if in a Sell order price meets SL point, the order will be closed, while if price reaches TP level the order will not be closed unless it passes TP plus the amount of spread.
In a Buy order, price must reach the TP price so that order can be closed.
If price moves toward SL price, order will be closed even if it does not reach SL price.
SL price plus spread will be closer to the order price rather than sole SL price.
For example, if the SL price in this order is 1.66955 and spread on GBPUSD is 2 pips, then the order will be closed on 1.66975.
On a Sell Stop order platform will execute the pending order as soon as the price reaches the Sell Stop price, while Buy Stop order will be executed sooner with the amount of spread.
That concludes this session, until next time and another session take care.