In the Forex markets, some type of automation is required. This is because the market is open 24 hours a day, seven days a week. As a result, the value of an investor’s holdings and their net worth fluctuate 24 hours a day, seven days a week. If an open position is not managed for a few days, its monetary value may alter dramatically. Furthermore, until you are a large global organization with the ability to pay individuals to work around the clock, it is not practical to manually manage positions 24 hours a day, seven days a week.
As a result, market orders are useful in this situation. These are tools that investors and traders in the Forex market use to manage their open positions passively. There are different types of orders in the Forex market:-
Market orders are the most common type of order in the Forex market. It’s a purchase order made at the current market price, to put it simply. As a result, if you’ve ever made an online transaction, you’ll recognize how the “Buy Now” button works in the Forex market.
When a market order is placed, it may be argued that it is executed in real-time. This order automatically searches the market for the best possible price and places your order at that price. Because the Forex market’s values change so quickly, your market order may be executed at a slightly different price than you expected. In market terminology, this is referred to as “slippage.” Slippage can work in an investor’s advantage at times, but it can also work against him at other times.
A market order immediately becomes an open position. As a result, any profits or losses on this order must be realized when the position is closed.
A pending order is a request to execute a purchase or sell deal, also known as a market order, only if specific criteria are met. As a result, it can be considered a conditional market order. Pending orders are not executed and are not included in margin calculations until they are executed. Pending orders remove the need to constantly monitor the market to execute a deal. Rather, it allows traders to create automatic orders that will execute transactions in real-time if certain circumstances are met. Pending orders, for example, minimize the requirement for manual involvement in trading. In the terminal, there are four different types of pending orders:
- Buy Limit
purchase if the future “ASK” price equals the pre-determined value. The current price is higher than the amount of the order that was placed. This sort of order is typically issued in the hope that the security price will rise once it has fallen to a specified level.
- Buy Stop
buy if the “ASK” price in the future equals the pre-determined value. The current price is less than the order value. This type of order is typically made in the expectation that, once a specific level has been reached, the security price will continue to rise.
- Sell Limit
sell if the future “BID” price is the same as the pre-determined figure. The current price is lower than the value of the order that was placed. This sort of order is typically issued on the expectation that the security price will fall after reaching a specified threshold.
- Sell Stop
Sell if the future “BID” price equals the pre-determined amount. The current price is more than the value of the order that was placed. This sort of order is typically issued in the expectation that the security price will continue to fall after reaching a specified level.
Profit Booking Order
Profit booking orders are typically used to close off a lengthy open position by selling. The conditions that must be met before the square off can take place are specified in these orders. A profit booking order, for example, is an order to execute a trade if the profit reaches 10% or the price rises by 12%. These orders allow traders to lock in profits in a market where prices fluctuate quickly and putting orders manually can take a long time.
Stop Loss Order
A profit booking order is the inverse of a stop-loss order. It is, however, far more extensively employed in the markets than the profit booking order. The order establishes a lower limit that the investor is willing to accept. If the price falls below this level, the investors sell their holdings to minimize their losses.
As a result, a stop-loss order is used to close down a long open position when prices fall. This order, once again, responds promptly and prevents losses by acting far more quickly than hand intervention could.
Trailing Stop Order
A trailing stop order is similar to a stop-loss order in that it follows the movement of the market. This means that when the price hits a certain floor, this order also sells off an open position. In this scenario, though, the floor swings upwards if there is a profit.
Investors can also create dependent orders in the Forex market. This means that an investor can make two orders at the same time, but only one of them will be completed depending on market conditions. Alternatively, placing one order may trigger the placement of another order at a later time. Complex algorithms that execute trades with minimum human intervention can be designed using dependent orders.
Artificial intelligence is increasingly being used in the Forex market to execute deals. Many people believe that this is the only method to trade a market as volatile as Forex, which operates 24 hours a day, seven days a week.
The phrase forex order simply refers to the method through which you will enter or exit a deal. When trading forex, you have a lot more options than just buying and selling at the current market price to take advantage of trading chances, both now and in the future. If you want to learn more about the types of orders in the forex market then you can enroll in the Capital Varsity forex trading course where you will learn everything about the forex market in-depth.