TYPES OF ORDERS
Types of orders available for trading will vary by FCM and by trading platform. We have listed the more common types of orders below and provided brief explanations for each.
Any trade examples given below are not actual trading recommendations and are provided only for educational purposes.
Market Orders. A market order is an order to buy or sell a specific currency, which is to be filled immediately at the online current exchange rate quoted on the screen. Please note that fills may be much better or much worse if you attempt to trade during fast, volatile markets (such as around economic report releases, etc.)
Each of the online currency trading platforms offered through CFOS/FX offers our clients real-time streaming prices with fast, easy and efficient one-touch order execution. The market order allows the online currency trading client to follow the real-time bids and offers on the screen that can be executed with a click of the mouse. The most advantageous aspect of the market order is the ability for the trader to capture better fills. In simplest terms, CFOS/FX online currency trading clients will be offered a better price if the bid or offer improves while you are executing. However, if your price becomes worse, the foreign currency trading platform will warn you of the change (via an instant online requote) and confirm your desire to execute your transaction prior to providing a confirmation.
Limit Orders. An order to buy or sell a currency pair, which is executed when the forex trading price is breached. For example, you place an order to buy 100,000 euro at 1.0950. The online forex trading platform will automatically fill your order when the offer reaches 1.0950. Limit orders can be placed to both buy and sell forex contracts.
Stop Orders. A stop order is a type of limit order that is placed to attempt to "lock in" a specified gain or loss, closing the position. Typically a risk management order used by online forex trading clients to help manage their market exposure, this type of order can also be used to enter into a new position. Stop orders can be used to both buy and sell forex contracts.
Please note: A stop loss is designed to protect traders from excessive losses in the event that a market's price dramatically changes in one direction or another. As a general rule of thumb, even professional traders with years of experience should utilize stop losses. Traders should establish a threshold of pain before entering into a trade and set a stop loss at said level. When and if the price moves to the stop loss the trade will be closed. Stop loss and limit orders do not guarantee that the trader will be protected from loss. In certain market conditions, especially in "fast markets," a stop loss will be filled at the next available price which may be at a different price than the trader has specified, and could potentially be significantly higher or lower than the desired price.
The traditional "stop-loss" order is used by online forex trading clients to attempt to prevent losses in excess of pre-determined acceptable risk levels. Virtually all professional online foreign currency traders determine both their profit targets and risk levels prior to entering each and every trade. For example, if you bought GBP/USD at 1.7480 you could enter a stop-loss order to sell at, say, 1.7460. This would effectively attempt to limit your potential loss on the position to 20 pips if the price fell.
The "trailing stop" is used by online currency trading clients to attempt to lock in profits. For example, if you bought GBP/USD at 1.7480 and the online forex trading price has risen to 1.7520, giving you a profit of 40 pips, you may want to attempt to lock in a certain amount of that profit in case the price falls back down. On the online forex trading platform, you would simply place a stop order to sell at, say, 1.7510. If the forex trading price does drop, your position will be closed automatically with a profit of 30 pips. If the forex trading price keeps increasing and the position becomes even more profitable, the trader may move his or her trailing stop up yet again, thereby attempting to "lock in" more profits.
The stop order can also be used to enter into a new position. For example, if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected support-level of 1.3185 that the EUR/USD will continue to fall in price until it reaches a lower support level around, say 1.3150, then you could place a "sell-stop" order at 1.3180. The sell-stop order will trigger an automatic order to sell at market price once the EUR/USD is 1.3180 bid, allowing you to potentially capture currency trading profits from the expected downward price movement. Conversely, if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected resistance-level of 1.3225 that the EUR/USD will continue to rise in price until it reaches a higher resistance level around, say 1.3260, then you could place a "buy-stop" order at 1.3230. The buy-stop order will trigger an automatic order to buy at the market once the EUR/USD is 1.3230 offered, allowing you to potentially capture profits from the expected upward price movement.
It is important to note that, by convention, buy limit and sell stop orders are entered at some price below the current market price. Sell limit and buy stop orders are entered at some price above the current market price.
GTC or GTM Orders. "GTC" simply stands for "good-til-cancelled" and is fairly self-explanatory. When a GTC order is placed, the order will remain in effect ("good") until it is cancelled by the trader. For example, if you place an order to buy 3 EUR/USD at 1.2700 "GTC," then the order will remain in effect until you cancel it. "GTM" stands for "good-til-market close," meaning the order placed will only be good until the close of daily trading (4 p.m. CST rollover) and will be automatically cancelled at that time.
HIGH RISK ASSOCIATED WITH LEAVING A POSITION OPEN OVER THE WEEKEND OR A NON-TRADING HOLIDAY. Good-til-cancelled (GTC) orders working as of Friday's market close may not be filled until trading resumes on Sunday or, in the case of a holiday, until the next day the forex market is open for trading. Forex rates may gap up and/or down significantly (increase or decrease in the forex rate by more than the smallest trading unit) over the weekend or over a holiday. Such instances of forex rates gapping over the weekend or over a non-trading holiday could result in significant losses for the trader and fills that are significantly worse than expected.
"OCO" Orders. "OCO" stands for "one-cancels-the-other" or "order-cancels-order." An OCO order is used when two separate orders are placed but only one fill is required by the trader. For example, if you bought EUR/USD at 1.3240 you could then simultaneously place a sell limit order at 1.3270 and a sell-stop at 1.3220 "OCO." You would then effectively have your profit target order in place while simultaneously protecting yourself with a stop-loss if the market moved against your position. If one order or the other order was to get filled, then the remaining order would immediately and automatically be cancelled. Please be aware that in fast markets, due to extreme price volatility, you may be unable to place an OCO order where one or both of your orders are too close to the market (the current price).
"If Done" Orders. An "if done" order is placed to automatically enter a new order "if" the original order gets "done" (gets filled). This order allows our online forex trading clients freedom to work on other strategies or other business rather than having to constantly monitor the markets waiting for his or her original position to get filled before placing a new order. You could use an "if done" order in the following instance: you want to sell and you believe the current price of GBP/USD at 1.9270 is too low, but you would like to sell if the price rises to 1.9290. Further, you also want to protect yourself with a stop-loss believing in case the price continued to rise above and beyond your projected sell at 1.9290. You could place a sell-limit order at 1.9290 to effectively enter the market at your price, and you could also state "if done" place a buy-stop at 1.9305 to protect yourself from prices continuing to rise and move against your position. The net effect of your order is that "if" and when your order gets "done," then the buy-stop order would immediately and automatically be placed as protection.
HIGH RISK ASSOCIATED WITH TRADING IN FAST MARKETS. Forex rates may become volatile before, during and/or after economic report releases, breaking news and virtually any other event that could affect financial markets. Times in which forex rates become volatile are known as "fast markets" in which bid/ask spreads may widen significantly and/or forex rates may gap up and/or down quickly (increase or decrease in the forex rate by more than the smallest trading unit). Customers who choose to trade during fast markets do so at their own risk and should expect to experience widened bid/ask spreads, re-quotes and fills at significantly worse rates than expected.
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