Today, we will analyse the subcategories of pending orders.
There are four types of pending orders to enter the market.
- Buy Stop: This is a pending order to buy at a price that is higher than the current market price. For example, if EUR/USD is currently trading at 1.1110, a buy stop would be a pending order to start buying EUR/USD once it reaches 1.1120.
- Sell Stop: This is a pending order to sell at a price below the current market price. For example, if EUR/USD is currently trading at 1.1110, a sell stop would be a pending order to start selling once EUR/USD reaches 1.1100.
- Buy Limit: This is a pending order to buy at a level below the current price. If EUR/USD is currently trading at 1.1110, a buy limit would be an order to start buying EUR/USD once it reaches 1.1100.
- Sell Limit: A sell limit order is an order to sell at a level above the current price. If EUR/USD is currently trading at 1.1110, then a sell limit would be an order to start selling EUR/USD once it reaches 1.1120.
Apart from pending orders to enter a position, there are also pending orders to exit or close a position.
- Stop-Loss Order: The stop-loss order is a pending order to exit if the market moves against your position. It is set at a specific level in the opposite direction of your trade by a specified number of pips. Essentially, the stop loss acts as a safety net for the trader. If the market turns against the open position, the stop loss will be activated, thus protecting the trader’s funds. A stop-loss is designed to limit losses on a particular trade. For example, setting a stop-loss order for 10% below the price at which you buy will limit your loss to 10%.
- Take-Profit: The take-profit order is used to exit a position when the market moves by a predetermined distance in the direction of your position. You set a take- profit order at a specific level at which you want to realise profits. So basically, a take- profit order defines the amount a trader aims to gain on the particular trade.
- Trailing Stop: A trailing stop is an order designed to lock in profits or limit losses as a trade moves in the desired direction. For example, in a long position, a trailing stop can be set at 20 pips distance below the price. As the price moves 10 pips in the desired direction, the trailing stop will also move 10 pips in the same direction.
