Every Order Type Explained in Detail
Managing an order is tough work. Much like the actual sense of the word, taking an order means jotting down a list of instructions. Which you then use to follow what you need to do. Simple as that. However, in the forex market world, the word order means something different. Orders are used by investors to their brokers to ensure that their list of instructions is used to the best of their capabilities. But orders are not just restricted by the investor’s commands. The order type is also taken into consideration.
But what is an order type? And how many order types are there? Above all, how important is learning about order types? Well, all of that will be answered in this article.
What are Order Types?
Almost every single market out will accept orders from any legal individual or institution. However, if you are a sole-trader then you need to find yourself a suitable broker to help manage your trades. And then the broker-dealer will place them in an order type. The market will then decide and sort the trade into whatever order type it can qualify.
When you want to buy something, you go ahead and buy it. That is how simple it should be when you like something. And that is exactly what a market order is.
A market order is instructed by the investor to the broker to purchase a security at the next available price. Market orders don’t need to have any sort of price. You can, at any point, purchase if you so desire. However, trading liquidity is still needed to conduct trades. Market orders are usually for traders who just want a fast and easy way of making money.
Limit Buy Order Type
There is no better feeling than knowing that what you purchased for was less than what you expect. Just like a sale, that is the main concept of limit buy orders.
A limit buy order is basically you, as a trader, ordering your broker to purchase a stock if it goes below a designated price point. Limit orders are a great way to ensure that a buyer pays only a certain amount. Perfect for budgeting their trades for futures. Also, limit orders can remain in effect until they are executed, expire, or are canceled.
Limit Sell Order Type
Similar to limit buy orders, limit sell orders are directed by the trader to sell their stock should the price reach a designated price point or higher. This type of order is usually used for long positions and if its time to rake in a good profit.
Sell Stop Order
There is a thing as too much. You don’t want to overstock with your purchases. You want to have just enough to sell when it is the right time. And that is exactly what sell stop order does.
A sell stop order is an instructed order that tells the broker to start selling an asset when it reaches a certain price below the current price point.
Buy Stop Order
A buy stop order works oppositely to sell stop orders. It does so by instructing the broker to buy an asset when it reaches a specified price point above the current price.