Pending orders can sometimes be a bit of a tricky thing to understand. The world of forex trading can often be hard to get your head around. Fortunately, we are able to cover the different aspects of pending orders to help you fully understand how they work. Keep reading to discover exactly how pending orders are put through and the different kinds of pending orders that are available.
Market orders are the most common form of pending orders that you can find. You only have to look into any forex trader, such as reading this ForexTime broker review, and you’ll see that market orders are placed on a very regular basis. These are very fast orders that are placed instantly. So, when you place a pending market order, it will be placed at the earliest possible opportunity.
Of course, day traders tend to use this method the most often, which makes it extremely popular. However, traders who are just starting out also use it as it’s generally the easiest to get started with. The issue with market orders is that there are no ways to input loss limits, so you will have to keep an eye on the price when using a market order to place a pending order. Of course, it’s also important to have a trustworthy broker too, so that you are protected when trading.
These are a little bit more complex than market orders. These are less risky trades that allow traders to make a trade without having to worry about big losses coming their way. What it essentially does is place a limit, which the trader can set themselves, on trades. This will then stop traders from making big losses if there is a fast price drop. It will sell any orders before the value drops too far.
While this is a big benefit for people who want to be less risk-averse, it can also be a negative for people who want to realize higher levels of profit. This is the trade-off with stop-loss orders. Traders aren’t able to grab huge profits as easily with this method of trading. So, if you’re a risk taker, this is not likely to be the method you use to place your pending orders. However, having these mechanisms in place to protect traders is important when it comes to bringing trading into a more modern environment.
It’s always important to carry out a lot of extra research around stop-loss orders before placing them. If you place it without looking over the numbers first, it might end up being impossible to make a profit through them. This means that although risks would be reduced, it would also make them a pointless endeavor.
Buy stops and sell stops
This pending order is basically used to predict when you think is the right time to buy and sell. So, you will enter the price point for buying or selling, or in some cases both, and then when the price hits that value, it will automatically buy. This allows you to getahead of the curve in terms of price changes.
This allows for potential losses to be curbed but also preset profit margins to be reached. It’s one of the more forward-thinking pending orders that can be placed and it allows traders to use research to work out the best levels to set their orders at.
This is a slightly more complex method of setting a pending order. What it does is it allows traders to set how many pips they will be willing to lose rather than a set cash amount. This offers more flexibility in terms of profit levels, but also gives traders the ability to control the level of losses they are willing to accept.
Of course, it doesn’t stop losses from happening, that’s generally not possible as trading always carries a slight risk. However, by allowing for the level of loss to be set beforehand, it means that traders don’t have to worry about making catastrophic losses.
It mitigates the level of risk while also allowing for profits to be made. It’s mainly used when traders follow trends and, therefore, it requires research to be carried out in order to be successful. If you use this method of pending order placement without carrying out any research, then it significantly increases the level of risk. That’s why even though research should always be done for trading decisions, it’s even more important for trailing stops.