Forex Trading Order Types

This article looks at the different types of forex trading orders available to a trader.

Forex Trading Market Orders

In order to succeed on the foreign exchange market, you must have a working knowledge of foreign exchange trading and its various aspects including orders.  All trades are comprised of different, separate orders, and when used together will form a forex trade.  There are a minimum of two orders present in any trade, the buy order and the sell order.

The buy and sell orders

The dominant orders found in forex trading are the buy and sell orders, each used to either enter or exit a trade.  If the trade is entering with a buy order it will be exited with a sell order.  If the trade is entered with a sell order then it will be exited with a buy order.

Yet, these are not the only orders available in forex trading.  Foreign exchange traders have access to a plethora of different orders that can be used in various combinations.  The three main categories include market orders, stop orders and limit orders, and they will be described below.  The majority of new traders may find these difficult to understand, especially when used in conjunction with each other.  It is with practical experience and further education that the orders will become simpler to understand.

The forex trading market orders

A forex trading market order is used in order to buy or sell a position at the most beneficial market price.  One unique aspect of the market order is that it is always ‘filled’ when used on an active market; however, this may not always been at the price desired.  Filled means the order has been executed and completed.

For example, a trader may place a market order when the best trading price is 1.2954.  However, the other orders are filled first and the trader’s order will be filled at 1.2957 instead of the desired 1.2954.

It is advised that one use a market order if you want your order to be processed, but is also willing to risk receiving a different price.

The forex trading limit orders

The forex trading limit orders are used to buy or sell a position at a particular or better price.  Filling of the limit order is not guaranteed and is dependent on the market movement.  However, if they are filled it will be at the specified or better price.

For example, if a trader places a limit order with a price of 1.2956 then the order will be filled at 1.2956 or better.  Yet, this is only achieved if the order is filled in the first place.

This type of order should be used if you are looking to receive a desired price, but are willing to risk not having the order filled.

The forex trading stop orders

The forex trading stop orders are very similar to market orders as they buy or sell a position at the best price available.  However, this type of order is only processed if the market hits a specified price.  If the stop price is reached, the order will be filled; but this may not be at the desired price.  It must be noted that the stop order will only be triggered if the trade is at or past the set price; so for a buy order the price must be above the current market price and for a sell order the stop must be below the current market price.



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