Stop and limit orders

Beginner Questions
1

hello i’m new to forex and i’m sure u’ve prolly heard these questions a million times :o…sorry…newayz i’m actually confused about 2 things right now
1)the limit n stop orders under pending orders…what do they exactly mean u know buy limit n buy stop or sell limit n sell stop n how n why do u use them
2)after using a pivot point calculator, lines labelled M (M1,M2.M3) appear along with the support n resistance lines…what does M stand for and what does it do.

thank you(hope it wasnt too much trouble)

2

I’ll tackle #1 and let someone else talk about pivots. They aren’t my thing.

A limit order is for “or better” execution. For example, if you have a buy limit order at 120, it will be filled at 120 or lower (lower being better).

A stop order becomes a market order when triggered. So if you have a sell stop at 100, when 100 is hit or violated to the downside (upside for a buy stop) it will trigger a market sell order.

This can all get a bit muddled with the way some retail forex brokers handle stops and limits, though.

4

Here’s a table that I made and posted to another forum several years ago, which answers the question you have raised.

Suppose the current price of a particular currency pair is 1.5000. The table shows:

[ul]
[li]5 types of orders — buy limit, buy stop, sell limit, sell stop, and market order
[/li]

[li]whether each order type would be placed above, at, or below the current price, and
[/li]

[li]what function each order type would perform
[/li][/ul]

858×474

I hope that helps you.

In another post, I’ll answer your question about pivots.

5

Regarding your [B]pivot[/B] question, the pivot levels labeled M1, M2, M3, etc., are simply [B]intermediate levels[/B], halfway between the PIVOT and R1, halfway between R1 and R2, etc.

What does the “M” stand for? I have no idea. Personally, I hate the way the intermediate levels are designated in most charting packages, because you can’t tell from a label (M5, for example) where that particular level might be.

I would prefer to label them R0.5, R1.5, R2.5, S0.5, S1.5, and S2.5. That way, the label would describe the level better. But, my platform doesn’t give me the option of removing or changing the default labels.

Some traders use pivots, and some don’t. Of those traders who do use pivots, the so-called “classic” pivots are the most common. But, there are several other systems of pivots, as well. The various systems generally calculate the PIVOT the same way, but differ in the way they calculate the other levels.

Most traders who use pivots apply them to DAILY charts. Of those traders who use pivots on DAILY forex charts, most use the PIVOT plus R1, R2, R3, S1, S2, and S3. Most do not use R4 and S4. Forex price moves on the DAILY chart almost never extend to the R4 or S4 levels.

I don’t know what the consensus is, among traders, on the use of the intermediate levels (M1, M2, etc.). I use them (stupid labels, and all). In terms of presenting potential support or resistance to price, I generally expect the intermediate levels to be [B]almost[/B] as strong as the main levels (R1, R2, etc.).

7

thnx a lot guys i really appreciate the help…

9

Here’s a visualisation of some of Clints table of order types:

1024×500

10

I use the MT4 Platform and can only place an order that is a minimum of 40 pips away from the current price (be it a sell or buy) is this usual? as it would rather render the platform useless to me!
Is there a way to reduce this somewhat vast gap? I have experimented with stop and limit orders and this seems to make no difference.
Any hints or help would be most appreciated. I should mention that there is a similar distance required for the Stops aswell.
Many thanks
Chris

12

That is very unusual. Either you were caught in some kind of event that caused a liquidity problem for your broker or they are incompetent. I would try again later, say during the Asian session to see if the problem is ongoing. If it is get a new broker - its not an MT4 problem. FXSolutions have fixed spreads and great liquidity and would never put you in this situation except in unusual situations such as NFP.

13

Thanks for your reply the Broker is ALPARI anyone else having the same problem?

14

Reguarding pivot points. M1 M2 are called mid pivot points. I could be wrong terminology has never been my strong point.

15

Hi,

I know this thread has been open for over year now, but I have a simple question i guess for Clint’s Table

On the order type table, For close position.

Now is my question: in MT4 we have Stop/Loss and Take profit is easier to use to close position, but if i wanted I could use
a sell limit order and a buy stop order to do the same ?

example: price is at 1.5000, I want to go long at 1.5100, I buy a stop order for 2 standard lot.
and to set my profit target I would buy a stop limit order at 1.5200 for 2 standard lot
and to set my Stop loss order I would buy a sell stop order at 1.4900 for 2 standard lot.

Is that it ? is for general knowlegde

16

Yes, you [I]could[/I] — but, [I][B]don’t.[/B][/I]

Your MT4 platform is making it easy for you to do what you intend to do, without having to remember which order type to use. So, take advantage of the convenience being offered to you.

Here’s another post which discusses what “entry orders” and “exit orders” actually do —

http://forums.babypips.com/newbie-island/38331-what-order-type-use.html#post248252

17

thanks appreciate,

I wont do it :slight_smile: is just for general knowledge.

18

Need some help lets say EUR/USD is at 1.5000 but I want put in an order to buy when it gets to 1.5030 and sell when it gets to 1.6010 how would I do that?

19

Your order to enter LONG (buy) would technically be a BUY STOP order to open at 1.5030.

And your order to exit (take profit) would technically be a SELL LIMIT order to close at 1.6010.

In addition, if you wanted to protect your open position with a stop-loss, then this would require a third order which would technically be a CONDITIONAL SELL STOP order to close your position at some price (which you would specify) below your entry price. This stop-loss order would be “conditional” because it could be triggered ONLY if your entry order had already been filled. Furthermore, your take-profit order and your stop-loss order would have to be OCO (one cancels the other), so that if your take-profit order were filled, your stop-loss order would be canceled, and vice-versa.

To see how these 3 order types fit into the complete menu of order types, refer back to the table in post #3 in this thread.

[B]With most forex platforms, you can avoid all the complexity described above[/B] — and avoid the very real possibility of making a bad mistake by placing the wrong type of order.

These platforms offer a simple ENTRY-STOP-LIMIT format, which is user-friendly and hard to mess up.

Different platforms may use slightly different terminology, but the gist of it is this: You enter the price at which you want to buy or sell (your ENTRY price), you enter the price for your stop-loss (typically referred to simply as a STOP), and you enter the price for your take-profit (typically referred to as a LIMIT).

On these platforms, you don’t have to worry about the BUY STOP / BUY LIMIT / SELL STOP / SELL LIMIT terminology.

When you simply specify three prices — your ENTRY, your STOP, and your LIMIT — your platform automatically takes care of the details.

Refer to this post for a description of how ENTRY orders are handled by one major broker.

20

Answer to question 1: • Buy Limit
This order is used when the price of a currency pair reaches the specified price, which is logically lower than the current market price…

21

The only I can say is Be careful with pending orders. You can freely manage your trading without them, this feature is just for those who are purely confident with how price will behave in certain period of time and they don’t want to wait for that moment. The only advice I can extract from my experience is using this type of orders on fixed spread account. In newbie times I gave some tries to pending orders with my Hotforex micro but I didn’t account for volatility, closely foregoing the point where an order is going to be opened. But then I switched to their fixed spreads account and no I really don’t take care about volatility, spreads are the same on any moment of my trading.