Type of Orders
Entry Orders: Orders to Open Positions
You can use Entry Orders to open new positions in the future when prices reach a specific level pre-determined by you, at which you would like to buy or sell. This means that should you spot a trading opportunity, be it in current or future market levels, there is always the possibility of maximising your trading potential.
There are two types of Entry Orders:
- Stop Orders
Stop Orders can be used when you believe the price will continue in the same direction after a certain point. For buy orders, this would be for order levels above the current price whilst sell orders would be below the current price.
For example, let’s say that USD/CHF is currently trading at 0.8030/0.8033.
You believe that if USD/CHF goes up to 0.8060, then it is likely to rise further. Therefore, you want to enter a Buy position when the price hits this resistance level rather than trade at the current price.
You place an Entry Stop Order to buy $10,000 on USD/CHF when the price reaches 0.8060. This means that when the USD/CHF ‘ask’ price reaches 0.8063, the order will be executed. You will be automatically entered into a new Buy position of $10,000 on USD/CHF.
- Limit Orders
You can use an Entry Limit Order when you believe that the price will reverse after a certain point. For buy orders, this would be below the current price whilst sell orders would be above the current price.
For example, let’s say the AUD/USD is currently trading at 1.0937 / 1.0939.
You believe that if AUD/USD reaches 1.0965, the Australian dollar will fall in value against the US dollar. Therefore, you want to enter a Sell position when the price hits this level rather than trade at the current price.
You place a Limit Entry Order to sell AUD10,000 on AUD/USD when the price reaches 1.0965. Therefore, when the ‘bid’ of AUD/USD hits 1.0965, the order will be triggered. A new Sell trade of AUD10,000 on AUD/USD will be opened automatically.
- OCO Orders
OCO stands for ‘One Cancels the Other’ and refers to two separate orders that are linked together on the same market. The first of the linked orders to be triggered and filled is entered into a live position, whilst the second order is subsequently deleted, I.e. one order filled will cancel the other. Traders use OCO orders when they sense that one of two scenarios may play out in a certain currency pair.
For example, let’s say the GBP/USD pair is trading at 1.6050/1.6052 and you felt that either; a fall below 1.6000 would open the pair up for further losses, or a break above 1.6100 could indicate more gains. Therefore, you place an OCO order for a buy Stop Order at 1.6110 and a sell Stop Order at 1.5990.
The GBP/USD forex pair price falls below the 1.6000 level and triggers the sell Stop Order at 1.5990. This means that the Stop Order is filled and a new sell position created whilst the linked buy Stop Order at 1.6110 is automatically cancelled.