In the world of foreign exchange, or forex, trading, placing orders is how you tell your broker to buy or sell currencies. But forex orders aren't just simple buy and sell commands.
There are different types of orders that allow you to control the price at which you enter or exit a trade, giving you more flexibility and potentially helping you manage risk. This introduction will guide you through the essential forex order types, explaining how they work and when you might use them in your trading strategy.
a) Market Order
An order to buy or sell which is to be done at the price immediately available: the 'spot' rate, the current ratres at which the market is dealing.
b) Limit Order
An instruction to deal if a market moves to a more favorable level (i.e. an instruction to buy if a market goes down to a specified level or to sell if a market goes up to a specified level) is called a Limit Order. A Limit Order is often used to take profit on an existing position but can also be used to establish a new one.
c) Stop Order
An instruction nto deal if a market moves to a less favorable level (i.e. an instruction nto buy if a market goes up to a specified level, or to sell if a market goes down to a specified level) is called a Stop Order. A Stop Order is often placed to put a cap on the potential loss on an existing position; which is why Stop Orders are sometimes called Stop-loss Orders. But can be used to entere into a new position if the market breaks a certain level.
d) Once Cancels the Other (OCO)
An 'OCO' (One Cancels the Other) Order is a special type of Order where a Stop Order and a Limit Order in the same market are linked together. With an OCO Order, the execution of one of the two linked Orders results in the automatic cancellation of the other Order.
e) IF DONE Order
An IF DONE Order is a two-legged order in which the execution of the second leg can occur only after the conditions of the first leg have been satisfied. The first leg, either a Stop or a Limit, is created in an active state and the second, which can be a Stop, a Limit, or an OCO, is created in a dormant state. When the desired price is reached for the first leg, it is executed and the second leg is then activated.
