Tue. Dec 7th, 2021

This article deals with trade with pending orders: buy limit, sell limit, buy stop, sell stop. Pending orders are of great help in various business strategies.

Why do we need pending orders?

A pending order is an order to open / close a buy / sell position as soon as the price reaches a certain level. Unlike market orders that are executed immediately for the current price, pending orders are only activated when quotes reach a specified value. If they fail to do so, the order simply will not be executed.

A trader is not always stuck in the trading terminal and cannot always grasp the right time to open a position. To close or open one at a certain price while doing other things, they use pending orders.

This is very useful for those who operate through technological analysis. They can place pending orders near a strong level of support / resistance with a rebound or an escape.

Aside from orders to open positions, traders actively use pending closing orders: Stop Loss and Take Profit.

  • Stop Loss is a protection order intended to close a losing position. It is placed to limit the risks if the business situation goes wrong.
  • Take Profit is an order that automatically closes a profitable position as soon as the quotes reach the level specified by the trader.

Learn more about SL and TP in the following article: (link)

Limit orders to open positions

A limit order is an order to open a position at a specified price or better. For purchase orders, the threshold is lower than the current market price, for sales orders it is higher. Therefore, limit orders are used when the trader expects the price to reach a certain level and then reverses.

These commands are often used in strategies aimed at bouncing strong levels of support and resistance. The peculiarity of limit orders is that they are executed at a price not lower than the set one. They can even run at a better price if the set level goes into a vacuum.

Purchase limit

The purchase limit is a pending purchase order at the Consultable price lower than the current market price. This order is used when the trader expects the price to drop to a certain level, where he plans to open a buy position. For example, if the GBP / USD price is 1.3880, but the trader wants to buy the pair at 1.3800, they should place a buy limit at that level or slightly above.

An example of using a purchase limit
An example of using a purchase limit

Sales limit

The sales limit is a pending order to sell at the bid price above the current market price. This order is used when traders are based on the growth of quotes at a certain level and plan to open a selling position there. For example, if EUR / USD is now close to 1.1750, while the trader wants to sell the asset at 1.1800, they place a sell limit at that level or slightly below.

An example of using a pending sales limit order
An example of using a pending sales limit order

Stop orders to open positions

Stop order is an order to open a market position as soon as the price reaches a specified level. A purchase order is made at a slightly higher price than the current one, a sales order, slightly lower than the same. Stop orders are used when the trader expects the price to reach a certain level and continue in the same direction.

They are used in business strategies that work with separate levels. The peculiarity of this type of order is that, as soon as the price reaches the specified level, it becomes a market one automatically.

If the market is quiet at this time, the order will be executed at the specified price. If there is a strong price push (in some important news, for example), a certain slip may occur and the position will open at a slightly worse price than set.

Buy Stop

Buy Stop is an order to buy at the Ask price slightly higher than the current one. Upon activation, the order opens a buy position at the level at which the price has risen.

Example:

Quotes in AUD / USD are 0.7130. The trader expects the pair to continue to grow if it breaks the nearest resistance level of 0.7150. Slightly above this level (e.g. 0.7160) they place a pending purchase order. When the Ask price reaches 0.7160, a buy position will open.

An example of using a pending purchase order
An example of using a pending purchase order

Stop selling

Sell ​​Stop is an order to sell at the bid price below the current market price. When triggered, the order opens a sell position at the level where the price has reached the decrease.

Example:

USD / JPY quotes are close to 110.50. The trader expects the pair to continue to decline if the 110.30 support level is broken. They place a pending sales order a little lower than this (for example, at 110.25). As soon as the offer price reaches 110.25, a sell position opens.

An example of using a pending sales order
An example of using a pending sales order

Making pending orders at the terminal

To place a pending order on a popular MetaTrader 4 trading terminal, open New Order using the main menu or a button on the desktop.

Under Order Type, choose Pending, and then choose between a purchase limit, a buy stop, a sell limit, and a sell stop. Then specify the opening price and expiration date of the order, if necessary. Then click Place an order.

Your order will be placed and executed by the broker as soon as the price reaches the specified level. You can also add limit orders at once: a Stop Loss and a Take Profit. In this case, your position will open and close (by SL or TP) by itself.

Placing a pending order in MetaTrader 4
Placing a pending order in MetaTrader 4

Final thoughts

Pending orders are a good help for some merchants and can not only be replaced by others. They help you execute many strategies, limit losses and make profits.

It is even possible that a trader will not look at the market if he has previously placed correct pending orders (although he always controls the risks). Planned positions will open or close automatically as soon as the price reaches the set level.

The material is prepared for

It has been trading in financial markets since 2004. The knowledge and experience it has acquired is its own approach to asset analysis, which it shares with listeners of RoboForex webinars.

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