Types of forex trading 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 0.92055, with bid and ask prices of 0.92045/0.92065.

You believe that if USD/CHF goes up to 0.92100, 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 0.92100. This means that when the USD/CHF 'ask' (Buy) price reaches 0.920100, 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 0.71325 – with bid and ask prices of 0.71317/0.71333

You believe that if AUD/USD reaches 0.71500, 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 0.71325. Therefore, when the ‘bid’ (Sell) price of AUD/USD hits 0.71500, the order will be triggered. A new sell trade of AUD10,000 on AUD/USD will be opened automatically.