Common Types of Orders You Can Place in the FX Market
The Forex (FX) market is a cash market, where currencies of various nations are traded. With its profit-generating opportunities, the FX market is increasingly drawing investors from across the world. The attraction of the FX market is such that nearly three trillion US dollars are traded on a daily basis. To participate in the Forex market, investors need to place orders with their brokers or directly through an online trading platform. The success of an investor in this market depends on the type of order they have placed.
When investors trade in the FX market, their first step is to place orders with their brokers to open or close a position. Or if trading for themselves, to open or close a position on their trading platform. The orders placed could be any of the following types of purchase orders:
Market Order: In a market order, an investor places an order to buy or sell a currency at the existing market price. These orders are normally executed in a matter of seconds.
Limit Order: In this type of order, an investor places an order to sell a currency at a predefined price. This order is placed to lock in a gain. A limit order is especially useful for a low-volume or extremely volatile currency pair, as it gives investors control over the sale price. This order is also useful when the investor expects the market to reverse its trend in the near term. The limit order remains active until the currency reaches a pre-specified price, after which it is automatically executed to clock in the gain desired by the investor.
A limit order has two variables, the time for which an order is active and the price level. An order that an investor specifies should remain active till he/she closes it is called Good Till Canceled (GTC). If an order remains active till the end of a trading day, it is called Good for the Day (GFD).
Stop Loss Order: A stop loss order is one that is placed to close a position before a currency value falls below a level settled by an investor. This order is placed to limit a possible loss in a currency pair transaction.
Stop Entry Order: In a stop entry order, an investor buys a currency above the market price or sells below the market price at a level settled earlier. The investor also specifies the duration for which the order should remain active. Such a purchase or sale is made only when the investor believes that the market would continue in the same direction. This type of order is usually issued to limit a possible loss on a transaction.
OCO (One Cancels Other) Order: An OCO order is a mix of two limit and/or stop orders in which an investor has specified the price and the duration for which the order should remain active. The OCO is such that when one order is executed, the other is cancelled immediately.
Placing the appropriate order can help investors take the maximum benefit from the profit-making opportunities presented by the FX market. easy-forex® offer easy-to-use, fast and reliable online trade facility to investors where they can place their FX orders.