Learn how to place market and limit orders to manage your trading strategy.
THE ORDER WINDOW
Learn a variety of order types, each with some unique characteristics. Some order types, like take profit and stop loss can be combined, it is important that you understand how to choose the best order types for your trading strategy.
A market order is executed immediately when placed. It is priced using the current spot, or market price. A market order immediately becomes an open position and subject to fluctuations in the market. This means that should the rate move against you, the value of your position deteriorates – this is an unrealized loss until the order is closed.
A limit order is an order to buy or sell, but only when certain conditions included in the original trade instructions are fulfilled. Until these conditions are met it is a pending order and does not affect your account totals or margin calculation.
The most common use is to create an order that is executed automatically if the price level reaches a certain level. When the conditions of a limit order to buy, or sell are met the order is automatically executed.
TAKE PROFIT ORDERS
A take-profit order automatically closes an open order when the exchange rate reaches a specified threshold. Take-profit orders are used to lock-in profits, for example, if you are long USD/JPY at 109.58 and you want to take your profit when the rate reaches 110.00, you will set this rate as your take-profit threshold.
If the bid price touches 110.00, the open position is closed automatically securing your profit. Trades are closed at the current market rate, in a fast moving market there may be a gap between this and the take-profit rate you had set.
STOP LOSS ORDERS
A stop-loss order is a defensive mechanism used to protect against further losses. It automatically closes an open position when the exchange rate moves against you and reaches the level you specified. For example, if you are long USD/JPY at 109.58, you could set it at 107.00 - if the bid price falls to this level the trade will close automatically.
Stop-loss orders can only restrict losses, they cannot prevent losses. Trades are closed at the current market rate, in a fast moving market there may be a gap between this and the stop-loss rate you had set.
TRAILING STOP ORDERS
A trailing stop order is used to restrict losses and avoid margin closeouts. It resembles a stop-loss in that it automatically closes the trade if the market moves in an unfavourable direction by a specified distance. The key feature is that as long as the market price moves in a favourable direction, the trigger price will automatically follow it by the specified distance.
This will allow your trade to gain value while minimizing the loss you are at risk for. For example, if you hold a long position the trigger price will move up if the market price moves up, but it will be unchanged if the market price moves down. Or, in a short position the trigger price will move down if the market price moves down, but it will stay unchanged if the market price moves up.
WATCH THE VIDEO
The Order Window
Learn about the OANDA order window to see where you can select different types of orders for your trades and how to protect yourself with a number of different options.
Open a demo account to fine tune your trade strategies
A trading strategy can offer benefits such as consistency of positive outcomes, and error minimization. An optimal trading strategy reflects the trader’s objective and personal approach.
Fundamental traders watch interest rates, employment reports, and other economic indicators trying to forecast market trends.
Technical analysts track historical prices, and traded volumes in an attempt to identify market trends. They rely on graphs and charts to plot this information and identify repeating patterns as a means to signal future buy and sell opportunities.
Leveraged trading involves high risk since losses can exceed the original investment. A capital management plan is vital to the success and survival of traders with all levels of experience.
Learn risk management concepts to preserve your capital and minimize your risk exposure. Seek to understand how leveraged trading can generate larger profits or larger losses and how multiple open trades can increase your risk of an automatic margin closeout.
Execution speed numbers are based on the median round trip latency measurements from receipt to response for all Market Order Fills executed between June 1st and Sept 1st 2016 on the OANDA legacy and OANDA v20 execution platforms, excepting MT4 initiated orders.
Contracts for Difference (CFDs) or Precious Metals are NOT available to residents of the United States.
MT4 hedging capabilities are NOT available to residents of the United States.
The Commodity Futures Trading Commission (CFTC) limits leverage available to retail forex traders in the United States to 50:1 on major currency pairs and 20:1 for all others. OANDA Asia Pacific offers maximum leverage of 50:1 on FX products and limits to leverage offered on CFDs apply. Maximum leverage for OANDA Canada clients is determined by IIROC and is subject to change. For more information refer to our regulatory and financial compliance section.
This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.
Trading FX and/or CFDs on margin is high risk and not suitable for everyone. Losses can exceed investment.