Those just starting in forex trading must understand how to set up and manage pending orders forex. Pending orders provide traders an automated way to execute traits when the price reaches a pre-defined level. It is highly valuable for traders who can not monitor the market regularly but still want To capitalize on favorable market conditions. Pending orders are significant and hand your trading strategy by allowing you to enter or exit trades by automating decisions, even if you are not watching the market accurately.
Pending Orders Types
Stop orders and limit orders are the two types of pending orders. Each type has two different subtypes, meaning there are four categories of pending orders:
Buy Stop Order
It is placed above the current market price. If a trader expects the price to rise after reaching a certain level, the buy-stop order triggers and buys once the cost exceeds that level, anticipating an upward trend.
Sell Stop Order
This order is placed below the market price. Traders use sell-stop orders when they anticipate the price will fall after hitting a lower price point.
Buy Limit Order
It is placed below the current market price. Traders use buy limit orders when they expect the price to decline to a certain level and then reverse upwards.
Sell Limit Order
A sell limit order is used when traders expect the price to reach a high and then reverse. Selling at a higher price permits traders to capitalize on the potential decline after the peak.
Best Practices For Using Pending Orders
To maximize the potential of pending orders forex, use the following tips:
- Pending orders can be affected by price volatility, leading to spillage. Always have a range for order prices to account for this risk.
- Incorporating take profit and stop loss levels ensures that trades are automatically closed to a desired level, minimizing losses and locking profits.
- Before implementing pending orders with real funds, you must practice using them on a demo account. It will help you understand how they function and adjust them according to market conditions.
- Although pending orders reduce the need to monitor the market regularly, it is still essential to check market trends continuously to ensure orders are aligned with the current market environment.
How Pending Orders Forex Works?
Pending orders are used ideally when a trader does not want to watch the market constantly but expects the market to move in a specific direction. Setting these orders permits the trader to automate their strategies, taking advantage of opportunities as soon as the price reaches the target level. For example, a buy-stop order is ideal when you anticipate a price break out in an upward direction, and a bile limit order is used if you expect the price to dip before rising again. On the contrary, a sell-stop order is beneficial when a price break below the current level is likely to lead to further declines, and a sell-limit order is appropriate if you believe the price will peak and then fall.