Types of Trades & Orders
Types of Trades
Long Position (Long) – The buying of a currency pair with the expectation of a rise in value. When buying, a trade is executed at the Ask price.
Short Position (Short) – The selling of a currency pair with the anticipation of making a profit as the price drops in value. When selling, a trade is executed at the Bid price.
Types of Orders
Market Order** – An order to buy or sell immediately at the best price currently available in the market. Market orders are popular for traders who want to buy or sell without delay. However, a market order does not guarantee a price; it only assures an immediate execution. The last-traded price is not necessarily the price at which the market order will be filled. In highly volatile market conditions, it is possible a market order will be filled away from the last-traded price.
Example: When placing a buy order on the EUR/USD at the current ask price of 1.2050, a market order is placed for a long position in the EUR/USD at the best price available in the market. A market order does not guarantee a price. It only has immediate execution.**
Entry Order** – An order to buy or sell when a specific price is reached and remains in effect until the client cancels the order. There are 4 types of Entry Orders:
- Buy Stop – a Buy order set at a price above the current price, and is filled as a market order when reached.
- Buy Limit – a Buy order set at a price below the current price, and is filled as a market order when reached. Often referred as a “Bid”.
- Sell Limit – a Sell order set at a price above the current price, and is filled as a market order when reached.
- Sell Stop – a Sell order set at a price below the current price, and is filled as a market order when reached. Often referred as an “Offer”.
Example of Entry Orders:
Stop-Loss Order** – A stop order to buy or sell an existing position at specified price for the purpose of stopping the position from accruing additional losses. For instance, a stop-loss order on a Long position is an order to sell (close) that position at a loss. A stop-loss order remains in effect until the position is liquidated or canceled by the client.
Example: If you have an open Long position in the EUR/USD, which you bought at 1.2050 and you want to set a stop order in case the value of the EUR/USD depreciates. A stop order could be set at 1.2030 to sell EUR/USD. When the market hits the stop order, the long position is closed with a 20-pip loss.**
NOTE: It is possible a Stop-Loss order may not be filled and may not be executed at the specified price which could result in a greater loss.**
Limit Order (Stop-Limit)** – A stop order to buy or sell an existing position at a specified price for the purpose of closing the position and locking in gains. For example, a limit order on an existing Long position is an order to sell (close) that position. A stop-limit order remains in effect until the position is liquidated or canceled by the client.
Example: Suppose you have an open Long EUR/USD position, which you bought at 1.2050. You decide to set a limit order to take profit if the price reaches 1.2080. When the market reaches 1.2080, the position is automatically closed with a 30-pip gain.**
NOTE: It is possible a Stop-Limit order will not be filled and may not be executed at the specified price which could result in a loss.**
Trailing Stop Order** – A stop order to buy or sell an existing position in which the stop loss price is set a either a fixed point or percentage away from the current exchange price. When in a Long position and if the exchange price rises, the trailing stop loss price rises proportionately; but, if the exchange price falls, the trailing stop loss does not change. This type of order allows a trader to set a limit on the maximum possible loss without setting a limit of the maximum possible gain. A trailing stop order remains in effect until the position is liquidated or canceled by the client.
Example: Suppose you have an open Long EUR/USD position, which you bought at 1.2050. You set a trailing stop order at 15 pips. If the long position rises in value by 15 pips or more depending on the trading platform, the 15-pip trailing stop rises accordingly below the maximum exchange price reached. Suppose the maximum exchange price is 1.2075, then the trailing stop is 1.2060. If the current exchange price retraces to to 1.2060, then the long position is closed at 1.2060 for a 10-pip profit.**
NOTE: It is possible a Trailing Stop order will not be filled and may not be executed at the specified price which could result in a loss.**
* The Forex market is an “off-exchange” market which may affect your trading outcome.
** With consideration of slippage, actual transaction costs may differ from attempted execution.
DISCLAIMER: Trading futures, options on futures and off-exchange Foreign Exchange market (FX, Forex) is very speculative in nature, involves considerable risk and is not suitable for all investors. Before participating in trading, you should carefully consider your investment objectives, level of experience and risk appetite. Investors should only use risk capital when trading because there is always the risk of substantial loss. Most importantly, do not invest money you cannot afford to lose. Any mention of past performance is not indicative of future results. Account access, trade executions and system response may be adversely affected by market conditions, quote delays, system performance and other factors.
Past results as represented in testimonials are not necessarily indicative of future results or success. Testimonials may not be representative of all reasonably comparable students. Trading involves significant risk of loss and may not be suitable for all investors.
RISK WARNING: Trading futures and foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your monetary objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your deposited funds and therefore you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent advisor if you have any doubts. Past returns are not indicative of future results.
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HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.