There are a number of different types of FX rates trades that you can enter when you trade FX rates. It is important that you know what these orders are and see if your broker offers them. Not all brokers will offer all the types of trades so it is best to check beforehand. The type of order you are going to use should relate to the entry and exit points you will be using.
Using the Market Order
The market orders are the most common and the easiest of orders to use. This order opens a position on the forex market at the market price of the time when the order is placed. When you place a buy market order you will be using the ask price that your broker is quoting. If you are placing a sell market order then you are using the quoted bid price for the order.
Having an FX Rates Entry Order
An entry order works a bit differently to the market order as it waits for a predetermined price to be reached. Once this price has been reached on the market the entry order turns into a market order. When you set these orders you need to tell the platform what price you want the entry order to trigger at. If the price movements never reach your entry price then the order is never triggered. If you use these orders you need to remember to remove them if they do not trigger.
The Use of Limit Orders
Many traders view limit orders as the same as entry orders. However, there are some differences that you should know about. Limit orders have two variations and one does work in the same manner as an entry order. However, the other order works in a similar manner to the stop order. The difference between the stop order and the limit-sell order is that a stop is set below the entry point and a limit-sell is set above it. There are not many traders who use limit orders because there are other easier options available.
The Use of Stop Orders
There are many different kinds of stop orders that you can use. However, they all have the same basic principle and that is that they stop the losses you are facing with a trade. When a stop loss order is triggered is becomes a market order which exits the market at the market price. These orders are commonly used as part of risk management and money management.
It is important that you know about the different types of stop orders and the ways that they can be used. The two most commonly used stop orders are the equity stop and the trailing stop. The equity stop is placed at a single level and does not move. This level is usually at 2% of the trading account as this is the highest risk the trader is willing to take.
The trailing stop is a bit different. The trailing stop will also be set a predetermined distance from the entry point. However, when the trade profits and moves away from the entry point the trailing stop follows. The trailing stop will always be the set amount below the order price.