Orders
Orders are useful trading tools which are a good solution for traders who are unable to devote of all of their time to keeping track of what is going on in the market. They are essentially automated trades waiting to happen.
It is impossible to keep track of all movements in the market, considering it operates 24 hours a day 5 days a week, and orders allow you to participate in market actions, even if you don’t have access to a computer.
With experience, there are many uses for orders, including:
- implementing trade strategies from entry to exit
- capturing short-term price fluctuations
- limiting how much you are willing to risk during periods of market instability
- protecting profits with minimal loss
- preserving trade capital
Usually most traders in the market will use orders, not necessarily as a main form of trade, but to ensure a limited impact of any adverse price moves on capital.
Types of Forex orders
There are many set types of orders. Not all of them are necessarily provided by all online brokers, and it is important to ensure what is available to you before making any decisions, especially given your circumstances. If you do not plan to become a full-time trader, orders will be more important to you than click and deal trading.
Take-profit orders, are used to lock in gains when you have an open position in the market. It is similar to stop-loss orders, which close out an open position that is losing money. Both of these are used to ensure financial secuity. Limit orders on the other hand ensure profit. They work by never selling below the price for which the given position was originally purchased.
Trailing stop-loss orders are an example of a slightly more complex order. They work by cutting positions which are at a loss, to ensure more winning positions. A trailing stop-loss order is similar to the stop-loss order, with the only difference being that in this case, you decide on a fixed number of pips from your entry rate. The trailing-stop order will adjust the order rate as the market price moves, only in the direction of your trade. If you set the trailing stop at 30 pips, in the event of the market going down 30 pips, the stop will be triggered and your position closed.
On the other hand, one-cancels-the-other orders (OCOs) are a combination of a stop-loss order with a take-profit order. They are a very good combination, as your position remainds open and active until one of the other order levels is reached by the market, and closes your position. It is a very good way of insuring profit, and minimal loss. OCOs are commonly regarded as the most important order, and in effect they are recommended highly by brokers for every position.
The last type of order is a contingent order, which is made up of several types of orders to create a comprehensive trade strategy. It is usually reserved for more experienced players in the market as it requires knowledge of market trends and currency relationships.
Investment strategy
Depending on the trading style you adopt, (short term, or medium-long term), you will follow a different investement plan. Even if you are a long-term trader who has implemented a set of orders, it is still important to keep an eye on the market in case of any significant economic news affecting your trades. When changes are made to the trading plan in reflection of these changes, it is only necessary to reduce the risk of the trade, by either taking partial or full profit, or moving the stop loss in the direction of the trade. You should always ensure you are up to date with occurances in the market, have a good understanding of how forex may react to changes, and be prepared to adjust your trading plan accordingly.
In the end, experience is the most important factor in forex trading. Through selling and buying stock, you will be able to evaluate your results and see how to trade more effectively next time. Assessing your trade outcomes through self-reflection will not only improve your skills, it will refine your trade style, help you improve future profit, and allow you to minimize loss.