Types of Forex Orders

Multiple types of orders are available in the forex market. Bear in mind that not all order types are available at all online brokers, so add order types to your list of questions to ask your prospective forex broker.

Take-profit orders

Don’t you just love that name? An old market saying goes, “You can’t go broke taking profit.” Use take-profit orders to lock in gains when you have an open position in the market. If you’re short USD/JPY at 117.20, your take-profit order will be to buy back the position and be placed somewhere below that price, say at 116.80 for instance. If you’re long GBP/USD at 1.8840, your take-profit order will be to sell the position somewhere higher, maybe 1.8875.

Limit orders

A limit order is any order that triggers a trade at more favorable levels than the current market price. Think “Buy low, sell high.” If the limit order is to buy, it must be entered at a price below the current market price. If the limit order is to sell, it must be placed at a price higher than the current market price.

Stop-loss orders

Boo! Sound’s bad doesn’t it? Actually, stop-loss orders are critical to trading survival. The traditional stop-loss order does just that: It stops losses by closing out an open position that is losing money.

Use stop-loss orders to limit your losses if the market moves against your position. If you don’t, you’re leaving it up to the market, and that’s dangerous. Stop-loss orders are on the other side of the current price from take-profit orders, but in the same direction (in terms of buying or selling). If you’re long, your stop-loss order will be to sell, but at a lower price than the current market price.

If you’re short, your stop-loss order will be to buy, but at a higher price than the current market.

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