Forex trading is a popular investment avenue for many people around the world. The forex market is known for its high liquidity, round the clock trading, and low transaction costs. However, forex trading also involves a high degree of risk as market volatility can lead to significant losses. Traders use various strategies to mitigate risk and improve their chances of making profitable trades. One such strategy is setting pending orders in forex. In this article, we will explore how to set pending orders in forex and the benefits of this strategy.
What are Pending Orders?
Pending orders are a type of order that allows traders to enter the market at a predetermined price level. This means that traders can set an order to buy or sell a currency pair at a price that is different from the current market price. Pending orders are useful for traders who cannot monitor the market all the time but want to enter or exit a position at a specific price level.
Types of Pending Orders
There are four types of pending orders in forex trading: buy limit, sell limit, buy stop, and sell stop.
Buy Limit: This type of order is used when a trader wants to buy a currency pair at a price that is lower than the current market price. For example, if EUR/USD is trading at 1.1200, a trader can set a buy limit order at 1.1100. This means that if the price falls to 1.1100, the order will be executed, and the trader will enter a long position.
Sell Limit: This type of order is used when a trader wants to sell a currency pair at a price that is higher than the current market price. For example, if GBP/USD is trading at 1.3000, a trader can set a sell limit order at 1.3100. This means that if the price rises to 1.3100, the order will be executed, and the trader will enter a short position.
Buy Stop: This type of order is used when a trader wants to buy a currency pair at a price that is higher than the current market price. For example, if USD/JPY is trading at 110.00, a trader can set a buy stop order at 110.50. This means that if the price rises to 110.50, the order will be executed, and the trader will enter a long position.
Sell Stop: This type of order is used when a trader wants to sell a currency pair at a price that is lower than the current market price. For example, if AUD/USD is trading at 0.7000, a trader can set a sell stop order at 0.6950. This means that if the price falls to 0.6950, the order will be executed, and the trader will enter a short position.
How to Set Pending Orders
Setting pending orders is easy and straightforward. Here are the steps to follow:
Step 1: Open your trading platform and select the currency pair you want to trade.
Step 2: Click on the New Order button, which is usually located at the top of the platform.
Step 3: Select the type of pending order you want to set from the drop-down menu.
Step 4: Enter the price level at which you want the order to be executed.
Step 5: Set the stop loss and take profit levels for the order. The stop loss is the price level at which the order will be closed if the market moves against you, while the take profit level is the price level at which the order will be closed if the market moves in your favor.
Step 6: Set the expiry time for the order. This is the time at which the order will be canceled if it is not executed.
Step 7: Click on the Buy or Sell button to place the order.
Benefits of Setting Pending Orders
Setting pending orders has several benefits for forex traders. Here are some of them:
1. Allows traders to enter or exit the market at a predetermined price level.
2. Helps traders to avoid emotional trading decisions as orders are executed automatically.
3. Reduces the risk of slippage, which is the difference between the expected price of an order and the actual price at which it is executed.
4. Enables traders to take advantage of market volatility by setting orders at price levels that are likely to be hit during price movements.
Conclusion
Setting pending orders is an essential strategy for forex traders who want to minimize their risk and improve their chances of making profitable trades. By setting orders at predetermined price levels, traders can enter or exit the market automatically without having to monitor the market all the time. Traders can set buy limit, sell limit, buy stop, or sell stop orders depending on their trading strategy. To set pending orders, traders need to follow a few simple steps on their trading platform. Overall, setting pending orders is a useful tool for forex traders who want to stay ahead of the game.
