There are many types of orders that traders can place to transact in the Forex market, for making profit out of it.
1.Market order
The market is the simplest and most common form of order. Here, the dealer buys the currency to sell at the market rate at the time of order.Because of the enormity of the market and the high volatility to reverse at any time so people placing orders at the market price to guard themselves against any nominal negative trend.
2.Limit Order
In this case, the dealer determines the price he wants to buy or sell the currency. Suppose a trader has bought GBP against the USD at 1.9710, then he must place a sell order at 1.9725, when the exchange will execute the order and he will profit from it. The order will get cancelled if the target price is not achieved during the day.
3.Stop-Loss Order
The stop-loss are important, because of the instability. They determine the maximum loss a trader ready to suffer. Suppose that in the above instance, the risk-taking ability of the trader is low, it can put a stop loss at 1.9705, at which level the exchange will book losses for him, and he won’t be affected by any fall below 1.9705.
4. Entry order
Such an order is filled only when certain conditions are met in the market, which the order specifies. The entry order can be a limit entry order or even a stop entry order.
-Limit entry order
As an example, let’s assume that the current market price for GBP/USD is 1.9705-10.This implies that the trader can transact at these levels. Here, a trader can put a limit entry order to sell his holdings at a price more than the market price, say, 1.9715. His order would be executed only if that price is attained. In the similar manner, he can place an order for buying at a level of, say 1.9700, and his ‘buy’ order would remain pending till the price falls to that level.
-Stop entry order
Such an order is generally used when the trader has sufficient grounds to believe that the currency is trading in a fixed range and believes that it is on the verge of a breakout from that range. He might want to buy at a price higher than the market price or sell at a lower price than the market price. In the same example, the trader may go ahead and buy at 1.9720 or sell at 1.9690, where he believes that once these levels are attained, the currency will only go up or fall further, as the case may be. A trader exercises the stop entry order only when a trader has reasonable grounds to believe that there will be sharp movements in the currency rates in the Forex market.
