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in forex tradingThere are many terms that may sound strange to a novice trader. Some examples are Buy Stop, Sell Stop, Buy Limit, and Sell Limit. These four terms apply to different types of pending orders. that can be applied to the trading platform If the trader does not want the order to be executed at the current price
For example, AUD/USD is currently at 0.7130 level. You would expect AUD/USD to strengthen to 0.7250 level but if the price can rise again to 0.7160 in such conditions. You won’t be able to use Market Orders as usual, but you have to use Pending Orders, which will only be triggered when the price has passed 0.7160. How? by selecting the Buy Stop option in the order form.
read: How to open a valid Forex position (OP) for new traders
A similar situation creates different types of pending orders. However, what are the rules? This article will discuss more.
buy stop and sell stop
Buy Stop and Sell Stop belong to the group of orders of type “Stop Order”. Use Buy Stop if you want to open a buy position above the current market price.. On the contrary A Sell Stop is placed if you want to open a sell position below the current market price.. Buy Stop and Sell Stop will not work if the price has not reached the level you set.
For example, in the AUD/USD example above, you used a Buy Stop at the 0.7160 level with a Take Profit target of 0.7250. The order will only be valid if the AUD/USD price movement continues to increase from 0.7130 to 0.7160. If AUD/USD drops to 0.7100 Buy Stop will expire.
Also read: List of news stories that have a high impact on the Forex market
In practice, the Buy Stop and Sell Stop order forms are similar to the normal market order forms. The trader must fill in the “type” field with “Pending Order”, not “Instant Execution”. After that, specify the Pending Order type as either “Buy Stop” or “Sell Stop” depending on the anticipated direction of price movement. Enter the desired trading volume (lots) along with Stop Loss and Take Profit levels, then specify the expiration period of the stop order.
There are usually three types of Stop Order expiration dates on the Metatrader platform: GTC Today and Specified. “GTC” stands for “Good Till Canceled”, meaning that the stop order will remain in effect until you cancel it or until the price moves. to a pre-defined level. “Today” means the Stop Order will be void if the price does not reach the relevant level within one business day. At the same time, if you select “Specify”, this means that you must also specify the exact expiration date when the stop order will automatically cancel.
After the expiration period has been set You can click “Paste” to immediately place the stop order. After that, you can close the platform and PC/laptop for other activities later. Trading platforms such as MT4 or MT5 The order will be executed automatically if the price reaches the range specified in the form. Is it really that easy!?
Buy Limited and Sell Limited
Buy Limit and Sell Limit are included in the “Limit Order” type of the order group. Buy Limit will be applied if you wish to open a buy position below the current market price.. On the contrary Set Sell Limit if you want to open a sell position above the current market price.In other words, Limit Orders are applied with the premise that the price action will take a reversal (Reversal or Retracement). Neither will work if the subsequent price movement does not reverse to the level you set.
Also read: How to Reduce Risk in Forex Trading
The form format for Buy Limit and Sell Limit is the same as in the previous example. The expiration date can be set as in the example above. the difference is After selecting the pending order type You must select either Buy Limit or Sell Limit option.
For example, when AUD/USD is at the 0.7130 price position, you predict the price will continue to fall to the 0.7100 level, but it will rise to 0.7200 first. In this scenario, you can apply a Sell Limit at the 0.7100 level with a Take Profit target of 0.7200.
On the other hand, if you expect the price to hit 0.7200 but will drop to 0.7100 first, you should use Buy Limit for clarity. Buy Limit is at 0.7100 with a Take Profit target of 0.7200.
The important thing you need to pay attention to
Note the differences between the above-mentioned Buy Stop, Sell Stop, Buy Limit and Sell Limit implementations. If necessary, practice on a demo account first. Before using it for real trading on real accounts, if mixed, it is impossible for your trading results to be chaotic. Many novice traders who try to use it are not profitable. but stumped
Also, be sure to set an expiration limit or cancel orders that are no longer active. As the default option is GTC, if the GTC-labeled order is not canceled, the order may be triggered at unwanted intervals. These different types of orders are available in forex trading platforms with the aim of making traders easier. However, if used without sufficient knowledge and experience may cause a crash
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