Pending Order

What is a pending Forex order? When we start trading in Forex, we use what is known as “market order” to participate. Just click on the button to sell or buy and you’re trading. The market order is telling the broker that he wants to get involved at the best possible price, or what is known as “market price”. There are no guarantees that you will have the price you see in the box or in the order window, but as Forex is extraordinarily liquid, most of the time it works.

Pending Orders

Pending orders on the foreign exchange market, or in other markets, are a set of instructions that you give to your broker when entering or leaving a position. Sometimes, with more complex trading platforms, you can have several actions in the same order. At its most basic level, it is looking at a scenario in which it is telling the market that it wants to enter or exit a position at an exact price. If the market does not reach that exact price, in this situation nothing will happen. There are several types of orders, but they will analyze the most basic ones that are most likely to be found.

Buy Stops

A purchase stop simply tells the agent that he wants to buy a couple of currencies at a specific price. For example, if you do not have the USD/CAD pair at 1.31, but you acknowledge that you are in the wrong position if the market reaches the level of 1.3180, you place a purchase limit at that price level to protect your account. This means as soon as the market reaches 1.3180, it will buy back the position to close trade and live to fight another day.

Selling Stops

The sales stops, of course, are exactly the opposite. If a price is touched, you want to sell the market, usually to close a position. Using an example of the GBPUSD pair, let’s say you are long at 1.30, and the price has traveled up to the level of 1.33. You want to ensure some profits, so you decide to place a point of sale at 1.3270 just below. If the market returns to the level of 1.3270, you sell your position and flatten the account, at least as long as the transaction is concerned.

Shopping to the Limit

A purchase limit is an order that says you are willing to buy a currency pair at a specific price or higher. A good example is if you want to buy the pair USD/JPY at 111.15, which is now the cheaper price than the market. As the market falls to the level of 111.15, you are only willing to buy it at that specific price, or better. It is possible to fill it at a lower price as is said to be “better”, but this is very strange to happen and always in a situation where there is a big slide during the news event. If your price is not affected, then nothing happens. You will pay 111.05 or less for the position.

Limit of the Sale

Clearly, this is the exact opposite of a limit purchase order, as it is setting a specific price you are looking to sell this pair of currencies. For example, the EURUSD pair is currently traded at the level of 1.1358, and recognizes that the level of 1.12 above is an area of resistance. You’re willing to shorten the market if you get up in that area, and you’re only willing to pay that price. You set a sales limit at that level and can complete your operation at that price or more to take advantage of the “best” part of the transaction.

Why Not Use Market Orders?

Of course, we are all guilty of this, but you should never use market orders if you can help it. This invites a slide that can cause major problems. On many occasions, it is not an alarming concern, but it can happen. And beyond that, if it slips, there’s no recourse. You can’t call your agent and complain about the slip and hope to get a reaction in our favor. With a price limit order in this situation, you have any say in the matter.

What is an order?

One of the first things every forex trader should know is about the different order types and implications of each one. An order in forex determines how you will enter or exit the market. Today, in trading, more options are available than just buying and selling at the current market price. With different order types, one can make the most of their trading opportunities.

Why are different order types needed in the forex market?

There needs to be some automation in the forex market. As we know that forex is 24 hours market, investors’ holdings, and their net worth keeps changing 24/7. If an open position is not managed regularly, the profit/loss figure can change drastically. Also, it is not possible to manage your positions all the time if you are working full time.

Therefore, in such a scenario, pending orders came in handy. These are tools investors and traders in the forex market use to manage their open positions. ‘Orders’ allow the traders to ensure that the value of their trades remain within certain bounds even though the market is open all day. Now let’s look at different order types.

Market order

Market orders are the most common types of orders used in the forex market. It is just an order to buy an asset at the current market price. Market orders are executed on a real-time basis when placed. Since prices in the forex market are changing rapidly, the order may be completed at a different price than you intended. This is known as slippage in market terminology. Slippage may work in the favor or against an investor. A market order creates an open position immediately.

A pending order is an instruction to buy or sell an asset when certain conditions are met. It is a type of market order that gets executed only when certain conditions are fulfilled. It is a conditional market order. Pending orders eliminate the need to monitor the screen for placing trades continuously. It sets up an automatic order system that will execute trades instantly when the conditions are met. There are different types of pending orders. They are:

Buy Limit Order
Sell Limit Order
Buy Stop Order
Sell Stop Order

Let’s understand each of these orders below.

Buy & Sell Limit Order

It is an order placed by the traders to buy or sell a currency at a particular price. Typically, this price is better than the current market price. Traders can find both buy and sell limit orders in most of the trading platforms. A buy limit order will always be below the current market price (or sometimes equal), while a sell limit is always above the current market price (or sometimes equal). For instance, if you want to buy EUR/USD at 1.05 and the current market price is 1.11. You can place a limit order at 1.05, and your order will automatically get executed if the currency pair reaches this price.

Application limit orders

Let us assume that the market is in a downtrend. As a trend, you wish to sell precisely at the support and resistance line. Since a market order does not assure the precise price, you can prefer placing a sell limit order instead. This is because, with a limit order, your order will get executed at the exact price you were willing to take the trade.

Buy & Sell Stop Order

This is the converse of Limit order. By using this order, traders can place a buy order above the market price and a sell order below the market price. By doing this, they can increase the odds of entering or exiting the trade at their preferred price.

Application of stop orders

Let’s say the market is in a range and there is some news coming up which you think will break above the range and head north. You being a breakout trader wish to buy it after the breakout. During the news, the volatility is so high that it is hard to get hold of a good price if executing a market order. So, here is where a stop order comes to action. With this order, you can keep a buy stop order just above the range, as it will execute the trade automatically when the price hits the buy stop price.

Stop-loss order

It is an order placed by the traders to limit their losses on the trades they take. By using this order, a currency pair can be bought or sold once its price reaches a particular price, also known as ‘Stop Price.’ For instance, if you buy USD/CAD for $1.31 and not willing to lose more than $0.1 when you exit, you can place your stop-loss order at $1.21. This order only gets executed if and only if the price of the currency goes below $1.21.

Conclusion

There are more premium orders that are being provided by the advance brokerage firms. Some of them include Trailing Stop-Loss Order, After Market Order, and Bracket Order, etc. The forex market is gradually moving towards artificial intelligence for executing trades. The latest development in ‘orders’ is the creation of dependent orders. This means the investor can place two orders simultaneously, and based on the input, only one of the two will be executed. Dependent orders use complex algorithms that execute trades with minimal human intervention.