Types of Forex Orders

Orders fall into two buckets:

  1. Market order: an order instantly executed against a price that your broker has provided.
  2. Pending order: an order to be executed at a later time at the price you specify.

Here’s a quick “map” of the different types of orders within each bucket.

Market Order

What is a market order and how do I use it? A market order is an order to buy or sell a stock at the market’s current best available price. A market order typically ensures an execution, but it does not guarantee a specified price. Market orders are optimal when the primary goal is to execute the trade immediately.

  • A market order is an instruction to buy or sell a security immediately at the current price
  • A limit order is an instruction to buy or sell only at a price specified by the investor.
  • Market orders are best used for buying or selling large-cap stocks, futures, or ETFs.
  • A limit order is preferable if buying or selling a thinly traded or highly volatile asset.
  • The market order is the most common transaction type made in the stock markets. It is the default choice in most online broker transaction pages.

Limit Order

A limit order is an order to buy or sell a stock with a restriction on the maximum price to be paid or the minimum price to be received (the “limit price”). If the order is filled, it will only be at the specified limit price or better.

  • Limit and stop orders indicate that you want to buy or sell a security at a specified price rather than the market price.
  • A limit order is visible to the market and instructs your broker to fill your buy or sell order at a specific price or better.
  • A stop order isn’t visible to the market and will activate a market order when a stop price has been met.
  • Although stop orders avoid the risks of no fills and partial fills, you may end up with a lower price than you expected.
  • A stop-limit order combines the features of both a limit and a stop order.

Stop Entry Order

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

You would use a stop order 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 entry order is an order placed to buy above the market or sell below the market at a certain price.

  • You place a “Buy Stop” order to buy at a price above the market price, and it is triggered when the market price touches or goes through the Buy Stop price.
  • You place a “Sell Stop” order to sell when a specified price is reached.

For example, GBP/USD is currently trading at 1.5050 and is heading upward. You believe that price will continue in this direction if it hits 1.5060.

Let’s take a look at how stop orders work using the following example. Say you want to buy Company B stock, which trades at $25. But you believe that the price will break above that threshold. You can place a buy-stop order by placing a limit on the price of $26.75 per share for 50 shares. As soon as the price reaches your preset limit, the order turns into a market order and it goes through.

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