how to understand orders
Market Orders And Pending Orders
2 TYPES OF ORDERS: MARKET AND PENDING ORDERS
There are 2 types of orders:
1. Market orders : Order is placed manually, live at current market price
2. Pending orders : Order that is placed at the market and will only become active if and when current price hits the specified price
Pending orders are especially useful when you do not have the time to be in front of the computer to monitor the price all day. It can be used on all time frames, but usually this method is utilized on higher time frames. Pending orders are normally used by traders to place a Stop Loss or Take Profit.
There are 2 types of pending order that can be used by traders : Stop Orders & Limit Orders.
Market Orders Vs Limit Orders
Main difference between market orders and limit orders are in the order execution. Market orders will be executed instantly at current prevailing market price when traders decide to trade. Limit orders will only be executed when the pre-specified BUY/SELL price has been reached. In this case, traders will not have any open positions until the pre-specified price has been met.
These allow you to set a pending order with a stop loss to anticipate price moving against your position. For example you have a BUY EURUSD at 1.3500 expecting price to move to 1.3700.
However nothing is certain and you want to limit your risk exposure. You place a STOP ORDER at 1.3450. This limits your risk exposure to just 50 points.
These allow you to set a pending order with a take profit to anticipate price moving in your position’s direction. These orders can also be used to place a trade when the price is not yet seen. Limit orders are used when you want to buy at cheaper level or sell at higher level.
For example: EURUSD is at 1.3500 and you want to buy at 1.3400. You can place a LIMIT ORDER BUY at 1.3400 so when price crosses that level you will automatically have a BUY position at 1.3400