Limit Orders

Category: Finance, Currency Trading.

When your broker buys or sells currency for you, he or she is" executing" an order.

These are the most common types of orders your broker can place for you: Market Orders. You can place different types of orders with your broker, depending on what you want to do, analysis and goals, your situation. This is the simplest kind of order and is the most common type used in day- trading. A trader places a market order by determining what type of currency pair he wants to trade, plus the number of lots he wants to trade. Simply, a broker places a market order to buy or sell a currency at the current market price. For the most part, you should be able to execute very quickly, just by clicking your mouse.

Limit Orders. Your order should go through almost instantaneously, at the price you requested. You use a limit order to buy or sell currency when the currency reaches a particular price. Your analysis shows that it should go to about 1125 and then start coming back up. For example, you might see that USD/ JPY is currently trading at 1150, with the price on a downward trend. Instead of waiting for it to drop to 1125 and then placing the order, you can place what's called a" limit order" at 112What will happen is that the order will be placed when the currency hits that price, automatically and without your having to sit around and wait for it to drop there.

It must hit 1125 before the trade executes, with this type of order. Now, if your analysis is off and the price only goes to 1130 before it starts coming back up, the trade will not be executed at all. In this case, the order is usually canceled at the end of the day if it does not execute. Experienced traders usually use stop- loss orders to help minimize losses. Stop- Loss Orders. If, for example, you expect the price of a particular pair of currencies such as GBP/ USD to go up, you can place a buy order at 8255 and a stop- loss order at 823However, if your analysis is incorrect and the price goes to 8185, a stop- loss order can protect you by automatically selling at 823Therefore, instead of losing 70 pips, you only lose 30 pips. What this means is that two orders are placed with prices both above and below the current price.

OCO. "OCO" stands for, "One order cancels the other order" . When one trade goes into play, the other cancels. One trade is canceled as soon as the other is executed. For example, if the price of USD/ CHF has been staying around 2435 for some time and you have a feeling it's going to change soon but you' re not sure which way it's going to go, you place an OCO order to buy at 2445 or alternatively, to sell at 245This way, your trade takes off as soon as the currency goes one way or the other.