What Order Type to Use

Beginner Questions
1

Hi - I am confused about what order type to use on my demo account (I don’t do live trading yet)

If the market is trading in a tight range and I expect it to fall then I would go short when price fell below the range and conversely buy if price rises above the range.

To do this I can either sit in front of the screen, wait for price to drop (or rise), then enter a market order or, presumably, I can enter some kind of conditional order that will execute when price falls (or rises) to a certain value.

I have been looking at stop orders and limit orders but am not sure which if any apply to my case.

Help please

Chris

2

I’m new myself and also trade with demo for the moment. But what you want to do is a “pending order”. It depends on which platform (software) you are working with. If it’s Meta Trader 4, you click on “New Order” you change the the “Type” with a dropdown to “pending order”, then in “pending order type” with another dropdown you can select “buy limit” or “sell limit”, then you set the price at which you want to buy or sell. Don’t forget to enter your take profit and stop loss values either.

3

Is it possible to adjust Stop loss and take profite orders after they were placed? If yes, how?

4

Yes, all platforms that allow you to create pending orders allow you to clear them and then create a new one

5

Technically speaking, what you’re talking about here is a stop order. A sell stop for the break-down and a buy stop for the break-out.

6

The easiest way for me to figure out which pending order applies, I think of it this way…presuming you’re using MT4…

Buy Stop order - If you want to trade a breakout of resistance, which is above current price.
Sell Stop order - for a breakout of support, which is below current price.

Sell Limit order - If you want to trade a bounce or reversal at resistance, which is above current price.
Buy Limit order - for a bounce/reversal at support, which is below current price.

Stop orders are for breakouts, limit orders are for reversals

Within each of those orders, you set your stop loss and profit target prices, and yes they can be changed “modified” afterwards.

Hope that helps :slight_smile:

7

Hi, Chris

Here’s a link to a previous thread which might have the answers you are looking for — 301 Moved Permanently

9

The good news is that with most Trading Platforms you don’t have to worry about all that BUY STOP, BUY LIMIT, SELL STOP, SELL LIMIT stuff.

Those trading platforms try to make order types as easy and intuitive as possible. As a result, a lot of the complexity gets hidden in the background.

For example, FXCM and many other brokers, offer you the choice of placing a MARKET order or an ENTRY order. You know what a market order is. And intuitively you know that an entry order must be one of those stop or limit orders talked about here on this thread. But, which one is it?

Well, the beauty of the ENTRY order protocol is that you don’t have to worry about it. The platform places the correct type of order for you, based on whether the price you have specified is above or below the current price. For ENTRY orders (orders to OPEN a position at a specified price), there are 4 possibilities:

Let’s say the current price is 1.5000, then —

[B]To open a LONG position at 1.5020 (above the current price)[/B] you would select ENTRY ORDER, select BUY, and enter the price at which you want to enter LONG. The platform will automatically enter a BUY STOP order at your specified price. You didn’t have to remember whether this should be a stop order or a limit order.

[B]To open a SHORT position at that same price, 1.5020[/B] (which is above the current price), you would select ENTRY ORDER, select SELL, and enter the price at which you want to enter SHORT. The platform will automatically enter a SELL LIMIT order at your specified price. You didn’t have to remember whether this should be a stop order or a limit order.

[B]To open a SHORT position at 1.4980 (below the current price)[/B] you would select ENTRY ORDER, select SELL, and enter 1.4980. The platform will automatically enter a SELL STOP order at 1.4980. You didn’t have to remember whether this should be a stop order or a limit order.

[B]To open a LONG position at 1.4980,[/B] you would select ENTRY ORDER, select BUY, and enter 1.4980. The platform will automatically enter a BUY LIMIT order at 1.4980. You didn’t have to remember whether this should be a stop order or a limit order.

It’s easy to get confused about stop orders and limit orders, when you’re talking about [B]entering a position.[/B] But, orders to exit a position are simple.

The order we all refer to as a STOP (meaning a stop-loss order) is simply a stop order. And it’s easy to know whether that order is a BUY STOP order, or a SELL STOP order. Clearly, if you’re LONG, your STOP will be a SELL STOP. And if you’re SHORT, your STOP will be a BUY STOP.

A LIMIT order (meaning a take-profit order) is simply a limit order. And it’s easy to know whether that order is a BUY LIMIT order or a SELL LIMIT order, based on whether you are taking profit from a SHORT position or from a LONG position.

But, with platforms such as FXCM’s and others, you don’t even have to remember that. You simply add a STOP with a specified price, and a LIMIT with a specified price, to a MARKET order, or to an ENTRY order, or to an open position, and the platform will do the rest.