Order Types

An order is an 'instruction' to your broker (via the trading platform) to execute a trade - i.e. to enter or exit the market.

Different brokers offer different order types. You should ensure your broker offers the types of orders described here.

Order Types

• Market Order • Entry Order
Market Order A market order is an order to buy or sell at the current market price.

According to the quote window below, EUR/USD is trading at 1.4122/1.4124.

If you wanted to buy at this exact price, you would click buy. Your trading platform would instantly execute a buy order at 1.4124. If you clicked 'sell', your platform would instantly execute a sell order at 1.4122.

These are both market orders.

Entry Order An entry order is an order to buy or sell at a specified price at some point in the future.

The main types of entry orders are:

• Limit Orders • Stop Orders • Trailing Stop Loss orders • Related Orders

Limit order
A limit order is an order to buy or sell at a certain price. The order specifies not only the price at which to buy or sell, but also how long the order should remain active.

For example, EUR/USD is currently trading at 1.4124. You want to go long (buy) if the price reaches 1.4150. You can either sit in front of your computer and wait for the price to reach 1.4150 (at which point you would click a buy market order), or you can set a buy limit order at 1.4150 (then you could walk away from your computer to attend to something else).

If the price goes up to 1.4150, your trading platform will automatically execute a buy order at that exact price. You also need to specify how long you want the order to remain active (GTC or GFD).

GTC (Good till cancelled): A GTC order remains active in the market until you decide to cancel it. Your broker will not cancel the order at any time. It is your responsibility to remember that you've placed the order.

GFD (Good for the day): A GFD order remains active in the market until the end of the trading day. The formal end of the day usually occurs at 5pm EST.

Stop loss order
A stop loss order is a limit order linked to an open trade, aimed at limiting your losses if price goes against you. A stop loss order remains in effect until the trade is closed or you cancel the stop loss order.

For example, you went long (bought) EUR/USD at 1.4150. To limit your loss, you set a stop loss order at 1.4120. This means if you were wrong and EUR/USD drops to 1.4120 instead of rising, your trading platform will automatically execute a sell order at 1.4120 and close out your position for a 30 pip loss. If you hadn't placed a stop loss and the currency continued to dive, your loss could have been enormous.

Stop losses are extremely useful if you don't want to sit in front of your computer all day, worried that you will lose all your money. You can simply set a stop loss order on any open positions and get on with other business.

It is risky business to enter the market without placing a stop loss. You're completely exposed without a stop loss. You need to protect yourself from unforeseen events that could wreak havoc on your account. A terrorist attack on the U.S., for instance, could do just that, causing the U.S. dollar to plummet.

As for limit orders, you specify how long you want the order to remain active (GTC or GFD).

Trailing Stop Loss Order
A trailing stop loss is a stop loss that moves as your trade progresses in your favor.

For example, say the current EUR/USD rate is 1.2951. You buy at that price and place a trailing stop loss at 40 pips. The stop order will be filled if the price moves against you and reaches 1.2911 (live rate - 40 pips). If EUR/USD moves in your favor, say, to 1.2995, the stop order will automatically adjust to 1.2955 - always 40 pips from the live rate.

The advantage over an ordinary stop loss is that the trailing stop order automatically 'trails' the rate if the position moves in your favor, locking in your profits as the trade progresses (offering the potential for greater gains), while still guarding against price declines.

Related Orders These are orders that are linked together to create more complex trading strategies.

» OCO (Order cancels other) An OCO is a mixture of one limit, and one stop order. One order is placed above the current price, the other is placed below. When one of the orders is executed, the other is cancelled.

This is how it works: say, the price of USD/JPY is 114.41. You want to either sell 100,000 at 114.30, or sell if the price reaches 114.51.

You place the OCO order, and when any of the orders is executed, the other is cancelled.

» If Done This is a two-legged order whereby the second single order is placed only if the first order is executed.

For instance, you believe EUR/USD is going down but will stall at 1.3060. When that price is reached, you think the market will rebound to 1.3100. So, you place an 'IF DONE' order telling the platform to buy if the price reaches 1.3060, and take profit when the price rebounds to 1.3100 (to make a profit of 40 pips).

That's exactly what will happen. If the price reaches 1.3060 you system will buy. And when the price moves up to 1.3100, your system will close the trade. You would have made your 40 pips profit. Of course, if the price does not reach 1.3060 nothing happens.

» If Done / OCO This is a variation of the IF DONE order whereby an order is placed only after the order in the IF section has been successfully executed.

Example: You want to buy EUR/USD if the price reaches 1.4171. If it does, you then want to EITHER take profit (limit order) at 1.4201 OR accept a loss (stop loss) at 1.4151. So you place an IF DONE / OCO order.

Here is the order window on ACM's platform.




You may then turn your back knowing that IF 1.4171 is reached, your platform will buy EUR/USD at that price, and EITHER take your 30 pips profit at 1.4201 (if the trade moves in your favor), OR restrict your loss to 20 pips at 1.4151 (if the trade moves against you). The system will either take your profit, or hit your stop loss. It will never do both.

This order type IF DONE / OCO is extremely useful. That's what we use in our strategy.

An IF DONE OCO order is actually simpler than it seems. It can be placed in a matter of seconds.