Types of Forex Orders – All You Need To Know

Would you like some spread with that?

LOL, gotcha!

It’s not that type of order.

In forex, the term order refers to how you will instruct your broker to enter or exit a trade on your behalf.

Forex Order Types

There are many different types of forex orders, which traders use to manage their trades. While these may vary between different brokers, there are some basic order types that all brokers accept.

These orders fall into two categories:

Market order: an order immediately executed for a price that your broker provides at that given moment. These include: buy and stop orders.

Pending order: an order to be executed at a later time at the price you specify. These include:

Buy limit, Sell limit, Buy stop, Sell stop. 

What is a Market Order?

A market order is an order to buy or sell at the current price.

For example, let’s say the bid price for the currency pair EUR/USD is currently at 1.1920 and the ask price is at 1.1922.

If you wanted to buy EUR/USD at market, then it would be sold to you at the price of 1.1922.

You would click buy and your trading platform would instantly execute a buy order at that (hopefully) exact price.

In theory, it is the same thing as when you’re ordering a mermaid costume for your cat from Amazon. You click once and it’s yours! 

The only difference is that you are buying or selling currencies instead of some crap everyone on your street will make fun of you for. 

It is important to note that depending on forex market conditions, there may be a difference between the price you selected and the final price that is executed on your trading platform.

What is a Limit Order?

A limit order is an order to buy or sell if the price comes to your desired level. 

Think of a limit price as a price guarantee. 

By setting a limit order, you are guaranteed that your order only gets executed at your limit price (or better).

You can place a “Buy Limit” order to buy at or below a specified price.

You can place a “Sell Limit” order to sell at a specified price or better.

Once the market reaches the limit price the order is triggered and executed at the limit price (or better).

Limit orders work for you and can only be executed once the price becomes more favourable to you. The catch is that the market price may never reach your limit price so your order may never get executed.

Let’s see an example of a Buy Limit Order. 

Look at the image below. The blue dot symbolises the current price. The green line symbolises your Buy Limit Order price.

forex order types

For example, EUR/USD is currently trading at 1.1950 (blue dot). You want to go long if the price reaches 1.1900 (red line).

This is where you’d set a buy limit order at 1.1900.

If the market price drops to 1.1900 and touches or goes below your chosen ‘Buy Limit Order’ price, your order will be automatically triggered.

IMPORTANT: A limit order to BUY at a price below the current market price will be executed at a price equal to or less than the specified price.

Let’s see an example of a Sell Limit Order. 

Look at the image below. The blue dot symbolises the current price.  The red line symbolises your Sell Limit Order price.

forex order types

For example, EUR/USD is currently trading at 1.1920 (blue dot). You want to go short if the price reaches 1.1950 (red line).

This is where you’d set a sell limit order at 1.1950.

If the price goes to 1.1950, your trading platform will automatically execute a sell order at the best available price.

IMPORTANT: A limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specific price.

Stop Entry Order

A stop order “stops” an order from being executed until price reaches a stop price.

This type of order is used when you want to buy only after price rises to the stop price or sell only after the price falls to the stop price.

A stop order can only be executed when the price becomes less favourable to you.

Stop Loss Order

This type of order is slightly different from the order types above.

This is simply because the types above are orders to get you into a trade, an entry orders.

Whereas a stop-loss order is to get you out of the trade.

It’s an exit order.

This type of order serves the purpose of preventing additional losses if the price goes against you.

If you are in a long position, it is a sell STOP order.
If you are in a short position, it is a buy STOP order.

For example, let’s say you went long (buy) EUR/USD at 1.1950. To limit your maximum loss, you set a stop loss order at 1.1920

This means if you were dead wrong (unbelievable, I know) and EUR/USD drops to 1.1920 instead of moving up, your trading platform would automatically execute a sell order at 1.1920 the best available price and close out your position for a 30-pip loss.

Remember, losing is a part of forex trading and a small loss is better than a big loss! Take them on the chin and move on.

Stop losses are extremely useful when it comes to forex trading, especially if you don’t want to sit in front of your monitor, biting your nails all worried that you will lose your money.

That’s a lot of terms we covered today! Good job on reading all the way down here. With this attitude, you’ll be a trading like a pro in no time!

And don’t worry if things seem complicated, it gets easier with practice! Within a couple of weeks, you will be setting your own limit orders with one eye closed! In the meantime, feel free to download the cheat sheet below to help you along the road.