There needs to be some level of automation in the Forex markets. Because of this, the net value of an investor’s commands changes 24 hours a day, seven days a week. So, if an open position is filled for a few days, its value in money may stay the same.
Also, you can only actively manage the jobs 24 hours a day, seven days a week, if you are a large global company that can pay people to work around the clock. In this kind of situation, market orders are very helpful.
These are the tools that Forex traders and investors use to manage their open positions passively. Even though the market moves 24 hours a day, seven days a week, these tools let investors ensure that the value of their trades stays within certain limits.
Market Order
There are many orders on the Forex market, but the most common type is the market order. It’s an order to buy something at the current market price. So, if you’ve ever bought something online, the Buy Now button works the same way as a market order on the Forex market.
So, a market order is executed in real-time when it is placed. This order searches the market for the best price and then books your purchase at that price. Prices on the Forex market change so quickly that your order may be filled at a different price than you planned.
This is known as “slippage” in the market. Slippage can be good for an investor but can also hurt an investment. So, when this order is closed, profits and losses must be considered.
Pending Order
Pending orders are orders to buy or sell a deal, also known as “market orders,” but only if specific requirements are met. So, it could be a conditional market order. So, pending orders are not carried out and are only counted toward the margin once they are finally carried out.
With pending orders, you can avoid constantly watching the market to make a trade. Instead, it lets traders set up automatic orders that make trades happen in real-time when the conditions are right. Pending orders, for example, minimize the requirement for manual involvement in trading.
Profit Booking Order
Profit booking orders are usually used to sell, which means to close out a long open position. These orders spell out what needs to happen before the square-off. For example, a profit booking order is an order to trade if the profit reaches 10% or the price goes up by 12%. Traders can make money with these orders in a market where prices change quickly, and placing orders by hand can take a long time.
Stop Loss Order
A stop-loss order is the opposite of a profit booking order. But it is used in markets more often than the gain booking order. With the order, the buyer sets a minimum price they are willing to pay. If prices drop below this level, investors sell their assets to cut their losses as much as possible. So, a stop-loss order is a request to close a long position when prices go down. Again, this system is much faster than doing things by hand, which keeps losses from happening.
Trailing Stop Order
A trailing stop order is the same as a stop loss order. This means an open position will be closed when the price hits a certain floor. But in this case, the floor goes up if there is a profit. Suppose you place a trailing stop order 10% below the market rate. The next day, your investment was worth 15% more than it was the day before.
With a stop-loss order, the floor price would stay the same, 10% below the price you started the trade at. On the other hand, a trailing stop order moves along with the market price. In this case, the price floor would be 10% below the new market price, which would be after the price has reached a new high point.
Dependent Orders
On the Forex market, investors can also place orders that depend on other orders. The investor can place two orders simultaneously, but only one will be filled depending on how the market is doing. On the other hand, putting in one order could lead to putting in another order at some point in the future.
Using dependent order, you can make complicated algorithms that run transactions with little or no help from a person. For deal execution, the Forex market is increasingly turning to artificial intelligence. Despite the Forex market being open 24 hours a day, seven days a week, and filled with unpredictable prices, many people think this is the only way to trade.
