There are several ways in which a trader can get in and out the market. Different approaches (or trading strategies) require different ways to get in and out the market.
Market order – Is an order to buy or sell a currency pair at the current market price. For instance, if the EUR/USD quote is 1.2538/41, using a market order will get you long at 1.2541 or short at 1.2538.
Limit order – This order allows us to get in the market below the current price (if we intend to go long), or above the market price (if we intend to go short.) This kind of market order is commonly used for a range bound strategy or by retracement traders.
Range-bound strategies: Buy at the bottom and sell at the top of a given price channel.
Retracement strategy: Waiting for a pull back (when trying to get long) or for a rally (when trying to get short) before entering the market.
Stop entry order – A stop entry order gets you in the market above the current price if you are trying to buy, or below the current price if you intent to sell. This kind of order is commonly used by breakout traders.
Breakout strategy: Waiting for the market to reach new highs/lows or break an important level before entering a trade.
Limit order – A limit order (or take profit order) specifies at what rate you will exit the market to take profits. If a trader is long, the limit order must be above the entry price. If the trader is short, the limit order must be below his/her entry level.
Stop order – A stop order (or stop loss order) specifies the maximum loss you are willing to take on any given trade in terms of pips. If you are long, the stop loss order must be below the entry level; on the other hand, if you are short, the stop loss order must be above the current price.
Duration of Orders
GTC (Good till cancelled)
This order remains active (“good”) until reached (filled) by the market action or cancelled by the trader.
GTN (Good till N, where “N” is a time period such as 1 hour, 1 day, 1 week, etc.)
Some brokers allow you to define how much time an order can be active until cancelled.
This order remains active (“good”) until reached (filled) by the market action or until the end of the defined time period (1 hour, 1 day, etc).
OCO (Order cancels the other)
An OCO order is a combination of two limit and/or stop orders. One order is placed below the market action and the other is place above the market action (doesn’t matter whether they are buy or sell orders), when the market fills one order the other gets cancelled.
By: Raul Lopez