I continue to find these orders super confusing. Say I want to buy the EUR/USD. And instead the pair goes against me. Which order do I place to take the other side of the trade?
Yes, its confusing.
Taking the first leg of your trade, it depends where you want to buy. If you wish to set a long entry order above the current price, this will be a buy stop order at the price where you wish to get in long. If you wish to enter long if price falls, you would set a buy limit order below the current price. In both cases, you should enter a stop order in case price falls unacceptably after your entry.
If you set a buy stop order, you could also set a sell limit so that you can enter short if price falls far enough. Make sure the sell order is below the stop-loss attached to your long order. If you want to get in short above the current price, you would set a sell limit order. If you wish to enter short below the current price, you would set a sell stop order.
Make sure the short entry order is also below the long position or order’s stop-loss.
I find on my platform that when looking at the chart and right-clicking above the current price, the only order options I have are buy stop or sell limit - there isn’t a way to get it wrong. Vice versa below the current price. But using this platform you might have to activate some optional feature that lets you enter orders off the chart.
I was thinking more along the lines of this. I would take my initial entry as a regular order, with a stop loss. I would then place a second order in the opposite direction. But I am unsure of how to place that second order.
Do you mean Hedging?
You buy, it’s moves against you. Then you sell
Is this what you mean?
Pretty much. But I would not be sitting in front of the screen all day. I would place both orders and go to work.
But I would not place my second order right away. I would give the initial order some room to work. And then if it moves against me, the second order would be in the reverse direction.
Will your first order be a market order or a pending order?
And will you be closing the first order before executing the second?
Why would you place a second order in the opposite direction? In no time you will be losing 2 trades instead of 1.
Your 1st trade hit stop loss does not necessary mean that price is going the opposite direction, it could be that price is bouncing within a range and is not ready to go in the direction of your 1st trade. If you place a 2nd order in the opposite direction, you will suffer 2 losses instead of 1. Of course you need to be sure of the trending direction.
Many traders tried to trade in opposite direction but only few of them succeed. It seems to be very interesting to change the direction of the position after being stopped out, but it doesn`t always work so in reality. In case if the trader will be stopped out near the border of th consolidation range if the stop was too close according to the volatility. If the trader will open the opposite position, it will lead to additional losses as the price could make a correction after previous movement.
Another point is that trader should always have a understanding of what is going on in the instrument, so it seems to be a bit strange when the trader changes his bias in a moment.
Spot on guy