There are four main trading order types that we will explore here, along with a couple of additional ones thrown in, as a bonus. Market orders, limit orders, stop-loss orders, and trailing stop orders make up the bulk of most peoples trading orders; so we will dig a little deeper into how these work.
The same order types shared here can usually be used in multiple markets, including forex, stock orders, commodities, and CFD trading – as long as your trading platform or broker supports them!
4 Main Trading Order Types
Market Orders: A market order is an order to buy or sell a currency pair at the current market price.
Limit Orders: A limit order is an order to buy or sell a currency pair at a certain price, known as the limit price. You can set ‘limit buy’, and ‘limit sell’ orders.
Stop-Loss Orders: A stop-loss order is an order to sell a currency pair when the market price reaches a certain price, known as the stop-loss price.
Trailing Stop Orders: A trailing stop order is an order to buy or sell a currency pair when the market price reaches a certain price, known as the trailing stop price.
All the trading order types listed, apart from a market order, are classed as ‘pending’ orders. This means that they are not guaranteed to execute immediately but upon the meeting of certain conditions (namely price).
When you place a market order, this is an immediate order. You are effectively telling your broker or forex platform to buy or sell a currency pair at the current market price, whatever that may be. This leaves you open to potentially getting a ‘bad fill’ on the price you receive and one that may not meet your trading plan.
Limit orders, on the other hand, give you more control over the price at which your trade is executed. With a limit order, you can specify the exact price at which you want your trade to be executed, and the order will only fill if that preset price can be met.
Stop Loss & Trailing Stop Loss Order
Stop-loss orders are designed to limit your losses in the event that the market price moves against you. A trailing stop order is similar to a stop-loss order, except that the stop-loss price is not fixed; instead, it trails the market price by a certain distance. The proper, and consistent implementation of stop losses is a vital part of a successful trading plan.
Additional trading orders terminology
You may see a few additional trading order types, and terminology listed on your broker trading platform. These are typically linked to how long the order you are making will actually stay valid before being cancelled. Some trades will wait to place indefinitely, whilst others will have clear conditions that govern their execution such as being automatically canceled at the end of the trading day, or at a specific date.
Good till cancelled means that an order will remain open until you cancel it manually. GTC orders are sometimes referred to as “open orders.”
Good for the day orders mean that an order will stay open until the end of the trading day, and if they are not triggered, be discarded. GFD orders are sometimes called “day orders.”
Good till date orders are an order type that will automatically expire at a specified future date. If your conditions are met before the date is reached, the order will execute; if not, it will be cancelled. GTD can allow you therefore to set up specific trades in anticipation of price movement. It is worth noting that this type of trading order execution is not available on all broker platforms.
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