A pending limit order has no impact on your account totals and can be cancelled at any time without consequence. If the conditions of a limit order are met however, the pending order is executed and becomes an active market order.
That quote says that a limit order turns into a market order. From my understanding of limit orders in other markets, this is not the way a limit order is actually supposed to work. A limit order is supposed to be an “Or Better” order, and if it turns into a market order, then it can’t be “Or Better” because slippage is possible.
It seems that Oanda is grouping limit and stop orders into one broad category of pending orders that turn into market orders once price reaches them.
Do all retail Forex brokers treat their “limit” orders this way?
Yes. Limit orders are exectued when the conditions are met. So when the conditions are met it is like placing a market order at that moment. But the advantage is that you don’t have to be at your screen, and your have a better position in the ‘Order book’.
There is nothing strange about what Oanda is saying there.
If you set the “default bounds” to zero your limit order will be filled at the price you set. I’ve been trading with Oanda for almost 4-years and can’t remember ever having a limit order filled at anything but the exact price I set. I also use the FxTrade “one-click feature without confirmation” and can’t remember ever having a market order price slip either.
I appreciate your response, Toekan. In other markets i.e. commodities, stocks, etc., a limit order does not turn into a market order. Limit orders get filled by market orders. That leaves the possibility of not getting filled, but you accept the risk of not getting filled and in exchange you get the benefit of getting a fill at the requested price or better.
In these markets, limit orders are used to buy at a price lower than current market price or sell at a price higher than current market price. What Oanda is doing would be called a “Market if Touched” order in the other markets. This order won’t give you the benefit of either a guaranteed fill at your requested price or better, or not getting filled at all.
I am trying to find out if this difference between the ways orders are treated is unique to Oanda, or if this is standard across all retail brokers in the Forex spot market.
After reading your follow-up post let me add this to my original comment. I suspect how orders are handled would depend a lot on the type of broker you’re trading with, market maker v pass-through non-dealing broker.
For example, Oanda makes the market for their clients so they can fill a limit order even if the market gapped through and never traded at the limit order’s price. Where the same order placed with a pass through broker would only get filled when there was a willing buyer’s or seller’s order, right?
Maybe that’s one of the advantages of trading with a market maker.
For example, Oanda makes the market for their clients so they can fill a limit order even if the market gapped through and never traded at the limit order’s price. Where the same order placed with a pass through broker would only get filled when there was a willing buyer’s or seller’s order, right?
Maybe that’s one of the advantages of trading with a market maker.
Forgive me if this is getting beyond the simple first post, I’ve been going down a deep rabbit hole reading some academic papers on markets recently. My understanding of what I’ve been reading could be completely off. I appreciate the discussion.
If market orders are filled by limit orders, or vice versa, in theory price shouldn’t be able to gap through a limit order. Limit orders are providing the liquidity and market orders are taking that liquidity. When a market order is submitted and consumes all of the available liquidity (limit orders) at a given quoted price, then price will move on to the next limit order.
Example: Suppose price on a currency pair is currently .9900 and I decide I want to go short 1000 units at .9950, so I place a limit order there. For the sake of this example, let’s say my limit order to short 1000 units at .9950 is the only limit order at that level. The next limit sell order is at .9980. So I’m willing to sell at .9950 but no one is willing to sell between .9950 and .9980
Price slowly makes it’s way up, and when the quoted ASK price is .9950, that is my limit sell order waiting to be filled that is creating that quote. A market buy order comes in for 2000 units. My limit order will fill the first 1000 units at .9950 and then price will gap up to .9980 where other people are willing to sell.
This is all in a vacuum without market makers and banks supplying liquidity, and a very hypothetical example. Sorry to go off on a tangent.
A lot of people get confused when it comes to this question because they don’t know what it is like when you are actually trading in a real market and not with retail as forex may have been their instrument traded or may have just been casual buy and hold investors in stocks.
So to anyone wondering if your money was actually going into the market you can instead of selling at the bid, buy at the bid by setting a limit order to go long lets say .1 pips above the current bid and there for the next guy who sells at market will sell at market to you there for you are actually capturing the spread in essence
Tyrano the only broker I know that does this without having capital of 50k+ is MB and some other one.
Don’t jump in on mb though because the problem is that your limit orders will nearly always get filled at market like with oanda UNLESS another mb user buys or sells at market while you hold the best bid ask.
I do not know of any broker willing to put orders under 1 mil into market.
Always consider currency futures if you are hell bent on this with capital around 10-30k
Sorry for my unorganized response.
I have been having fun looking for peoples orders in the order book and waiting for market to show they are on the wrong side so I can get in with a .1pip spread for a little quick 1 pip scalp. This can take out a bit of the risk.
Oh and about gapping i believe it happens alot in forex due to no centralized exchange.
Thanks, sultyice, this helps. Funny you should bring up MB because I just started looking into them, but everything I’ve seen says you won’t very often get limit orders hit by internal market orders, so it doesn’t much matter. And since they drastically lowered their Pay for Limits amount, I guess I’ll stick with Oanda for now so I can be as precise as I want to with position size.
