In the world of forex trading, there are two main types of orders that traders can use to enter or exit positions: the buy order and the sell order. While these orders may seem straightforward, there are actually several different ways to execute them, including using the sell by market and buy by market orders. In this article, we will explore what these orders are and how they work in forex trading.
What is a Sell by Market Order?
A sell by market order is an order to sell a currency pair at the current market price. When you place a sell by market order, your broker will fill your order at the prevailing market price, which may be higher or lower than your desired sell price. These orders are typically used by traders who want to exit a position quickly, without waiting for the price to reach a specific target.
For example, let’s say you have a short position in the EUR/USD currency pair, and you want to close it out quickly. You could place a sell by market order, and your broker would immediately execute the order at the current market price. If the market is moving in your favor, you may be able to exit the trade at a profit. However, if the market is moving against you, you may have to accept a loss.
What is a Buy by Market Order?
A buy by market order is the opposite of a sell by market order. It is an order to buy a currency pair at the current market price. When you place a buy by market order, your broker will fill your order at the prevailing market price, which may be higher or lower than your desired buy price. These orders are typically used by traders who want to enter a position quickly, without waiting for the price to reach a specific target.
For example, let’s say you want to buy the USD/JPY currency pair. You could place a buy by market order, and your broker would immediately execute the order at the current market price. If the market is moving in your favor, you may be able to profit from the trade. However, if the market is moving against you, you may have to accept a loss.
Pros and Cons of Using Market Orders
One of the main benefits of using market orders is that they are executed quickly and easily. You don’t have to wait for the price to reach a specific level, which can be especially useful in fast-moving markets. Market orders are also useful for traders who want to enter or exit a position quickly, without worrying about the price.
However, there are some drawbacks to using market orders. One of the main risks is slippage, which can occur when the market moves quickly and the price at which your order is executed is different from the price you expected. This can result in unexpected profits or losses, which can be difficult to manage.
Another potential risk of using market orders is that they may not be executed at the exact price you want. This can happen if there is a lack of liquidity in the market, or if the price moves too quickly for your broker to fill your order at the desired price.
Conclusion
In summary, sell by market and buy by market orders are two different types of orders that traders can use to enter or exit positions in the forex market. While these orders are easy to use and can be executed quickly, they also come with some potential risks, such as slippage and unexpected price movements. As with any trading strategy, it is important to carefully consider the risks and benefits of using market orders before incorporating them into your trading plan.
