Forex trading goes on for 24-hour a day, so how can you protect your positions when you are away from your screen?
There are a variety of automated orders that can be triggered at pre-set exchange rates and that can be deployed to control the downside and consolidate the upside.
Limit order
An order to buy or to sell at a specified price. A buy limit order can only be executed at the limit price or lower (better), and a sell limit order can only be executed at the limit price or higher (better). If you placed a buy limit order, the fill price would be at your limit price of better, meaning that it would be better to buy at a lower price compared to the submitted limit price. It would be better to sell at your limit price or better, meaning selling at a higher price.
In other words, Limit Order is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.
Market order
An order to buy or to sell at the current market price. The advantage of a market order: you can almost always expect your order to be executed (as long as there are willing buyers and sellers). The disadvantage: the price you pay when your order is executed may not always be the price you obtained from a real-time quote service or were quoted by a broker.
Market Order is an order to buy or sell at the current market price. They can be used to enter or exit a trade. Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.
Stop Market order
Buy or sell at market once the price reaches or passes through a specified price. Used by traders who either have a position (long or short) and want to close the position if it moves against them OR by traders who wish to open a new position once the currency rises to a specific level. The stop price on a sell stop must be below the current bid. The stop price on a buy stop must be above the current offer. Stop orders do not guarantee you an execution at or near the stop price. Once triggered, the order competes with other incoming market orders.
Stop Limit order
Works like a Stop Market order with one major exception. Once the order is activated (by the currency trading at or through the stop price), it does not become a market order. Instead, it becomes a limit order with a specified limit price. The advantage of this order is that you set a specified price at which your order can be filled. The disadvantage is that your order may not be filled. In this case, your exposure to loss will continue until the position is closed.
Trailing Stop order
Ride a currency's price trend, profit from its movement, and limit your downside risk without constantly monitoring prices. Trailing stops move your stop price with the price of the currency and are server-sided, protecting you in the event you lose Internet connection.
When using the trailing stop, it is important to know the answer to the question: How do you represent a pip per currency pair? A pip is the last digit to the right of the decimal point in the current currency dealing rate.
Threshold Triggered Order (TTO)
Specify two prices, an upper and lower price trigger. Once the market trades at either price, a market order is sent to the marketplace. This order type was designed to help limit potential losses and lock-in potential profits.
One Cancels the Other (OCO)
This order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.
"Combo" Order Types
A combo order involves a combination of two different order types. Whatever the action of the first part of the combo order is (either buy or sell), the trading system will send out an opposite order when the first part receives an execution. If we place a buy Market + TTO, the system will send out a market order to buy, and upon execution of that buy market order the system will send out an auto-closing sell TTO. This explanation would be the exact opposite for a sell market + TTO, first part of the order is a sell, the second part is the buy (to cover).
Limit + TTO
This combo order type will initially place a limit order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial limit order, an equal TTO is placed with your pre-set trigger prices. Please keep in mind that when the system sends out an equal TTO, you have to cancel and replace the TTO to change either the upper or lower trigger. With this being said, it is important to know how to place a stand-alone TTO.
Limit + Trailing Stop
Initially places a limit order on one side (either a buy or sell) and upon execution, places an opposite trailing stop on the other side (either a buy or sell).
Limit + Stop Market
Initially places a limit order on one side (either a buy or sell) and upon execution, places an opposite stop market order for the other side (either a buy or sell).
Market + TTO
Initially places a market order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial market order, an equal TTO is placed with your pre-set stop prices. To change either of your TTO price trigger parameters you must cancel and replace the order. Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.
Market + Trailing Stop
Initially places a market order (either a buy or sell) and upon execution, places an opposite trailing stop (either a buy or sell). Note: Upon execution of any part of the initial market order, an equal trailing stop is placed with your pre-set offset. You must know how to represent the number of pips of your trail offset per currency pair.
Stop Limit + TTO
Initially places a stop limit order (either a buy or sell), which works like a Stop Market order with one major exception. Once the order is activated (by the currency trading at or through the stop price), it does not become a market order. Instead, it becomes a limit order with a specified limit price. Your order fill price will be either at your specified limit price or better. Upon execution of the first part of the combo order, the system will place an opposite TTO (either a buy or sell). To change either of your TTO price trigger parameters you must cancel and replace the order. Note: Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.
Stop + TTO
Initially places a stop market order (either a buy or sell) and upon execution, places an opposite TTO (either a buy or sell). Note: Upon execution of any part of the initial stop order, an equal TTO is placed with your pre-set stop prices. To change either the upper or lower trigger you must cancel and replace the TTO. To change either of your TTO price trigger parameters you must cancel and replace the order. Note: Either the bid or ask price can trigger your upper and lower price triggers. At the time the trigger is met the system sends out a market order.
Stop + Trailing Stop
Initially places a Stop Market order (either a buy or sell) and upon execution, places an opposite Trailing Stop order (either a buy or sell). Note: You must know how to represent the number of pips of your "trail offset" per currency pair. At the time you place a buy Stop + Trailing stop you would enter your desired stop price to enter the position. When this buy stop price is reached by the market (in this case the ask) a market order to buy will be triggered. Upon execution of this first part of the combo order the system will send out an auto-closing trailing stop (reflecting the trailing offset you selected when first placing the order).
