The role of brokers (forex brokers ) is basically to act as an intermediary in the execution of orders between buyers and sellers. However it must be clear that such orders are not always executed at the same time they are entered, either for some type of problem with the broker or by decision of the operator, which is detailed below. The different types of orders that exist in the forex market are the following:
These are the simplest orders to enter into an operation and are basically orders to buy or sell a currency in relation to its counterpart. As a rule it is bought or sold in lots of 100000 units of the base currency (it is the one to the left). The movement of each pip equals 10 units of the counterpart (the currency shown on the right). However in the case of mini accounts the proportion is maintained although the volume is reduced to one-tenth of the aforementioned. Generally speaking the orders of this type are executed at the price that appears on the screen although in special cases this can vary as we will see later.
As an inheritance of stock trading electronically, the Forex market introduced types of orders that allow limiting losses as well as establishing a level of profit taking such as limit orders.
So the limit orders simply seek to execute the basic principle of buying cheap to sell expensive or vice versa that takes special importance in a market that works 24 hours a day like the Forex and in which many things can happen when we least think it, and in the Which many times the price sought is reached in different hours of operation than the one that started the same, which is quite probable in medium and long term operations. Of course, a limit order for a purchase will be a sale at a higher price and for sale a purchase at a lower price.
Stop Loss Orders
These are opposed to Limit orders and seek to fulfill the philosophy of limiting losses as the same name indicates, however their execution is similar to limit orders, in this case, a stop order will be for a sale a purchase in a value Higher and equally for a purchase a sale at a lower value. Stop loss orders are vital to avoid the accumulation of large losses, especially if the mercury moves against an hour at which we are not attentive.
This is basically a dynamic combination of the two orders presented above, ie in its beginning it works as a simple Stop Loss but as the market moves in favor of the position the Stop level moves to protect The gain, that is, limits the losses and lets the profits run. It is particularly useful in a volatile market in which one moment we can be winning and the other losing. In this way we make sure we have a profit.
Because this is one of the topics that cause more concern on the subject of orders, we will see a simple example:
A GBP / USD buy order is executed at 1.6400 with a trailing Stop of 10 pips, ie the stop starts at 1.6390, if the market touches this point before reaching 1.6410 the position will close with 10 pips of loss, Now if the price reaches 1.6410 the stop will automatically move to 1.6400, meaning that now in the worst case the position will be closed without losses or gains. In case the price moves up to 1.6420 the stop will automatically move up to 1.6410 and now in the worst case will close the position with 10 pips gain and so on.
Orders If Then
As its name indicates it is a conditional order where a market entry order is placed and if and only If that order is executed, it will proceed to another order to wait to be executed. It is extremely useful for those who operate expecting ruptures of areas of congestion, resistances and supports.
OCO Orders (One Cancel the Other)
Similarly to the above, the OCO is a mixed order, but unlike this, either can be executed and if so, the other will be canceled. These commands are used to simultaneously set Limit and Stop of an already executed command.
Continue Part 2