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Chapter 5, Part V. Order types in FOREX Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    STOP ORDER

    This type of orders uses when you want to buy at higher price or to sell at lower price than the current price on the market. You may think that this is an absurd. Who may want to buy higher or to sell lower? But not everything is so simple. In fact, Stop orders are a very powerful tool and here is why. First of all, a stop order could be used when you want to open a position if the market will break trough some resistance or support level. For example, your analysis tells that if some resistance area may not hold, and if the market will break above it, you expect that this move will continue farther in the upward direction. So, you may place a “Stop Buy Order”. Here is an example:

    Suppose that EUR/USD currently is 1.2570, and for a long time stands in some trading range, say, 1.25-1.2620. Your analysis tells, that if market will break out of this area to the upside (i.e. break upwards through the 1.2620 level), then this upward move will continue for some time and in this case you intend to open a Bullish position. So, again, you may sit, look at the display and wait, or you may place “STOP BUY ORDER” at 1.2620. In this case, if the market will reach 1.2620 or higher, the Buy Stop order shifts to Market order and your trading software will automatically execute your Buy trade at the best available price.

    If you expect a breakout to the downside rather, and also think that this move will continue after the breakout, then you can place “STOP SELL ORDER” at 1.2500. Here, if market will reach 1.2500 or lower, the Sell Stop order shifts to Market order and the software will automatically fill your Sell trade at the best available price.

    As you can see, Stop orders, in opposed to Limit orders, are used for entry, when you expect continuation of some move on the market after reaching the price at which your order has been placed.

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    Here is a screen for placing an order. See, you can choose what type of order you would like to place. Just below this field – you should point the price “at price”, and then press “Place”. It’s very simple, isn’t it?
     
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