The Demo Site

TYPES OF ORDERS

Sellers are ASKing for a high price

Buyers are BIDding at a lower price Trading is an auction
Slippage occurs with most Market Orders
The difference between the ASK and the BID price is the Spread




A Trader must understand what each order is and does and what part it plays in
capturing profit. As a Trader on the FOREX you use three types of orders: a
Market Order, a Limit Order, and a Stop Order. The two primary orders you
should use for entering and exiting the market are a Limit Order and a Stop
Order. Once you have placed your order to enter the market, there are two
procedures to that your need to understand. These are: One-Cancels-the-Other
(OCO) and Cancel-and-Replace. Properly executing your orders and
understanding these procedures play a very big part in your profitability.

Remember: all good carpenters carry a toolbox. The sharper his tools and the
more skilled he is at using them, the more effective he is. The sharper you are as
a trader the more effective and profitable you will become.

The following explains in detail what each order does. You must clearly
understand what each order does before you start to execute your orders.

Market Orders
: A Market Order is an order that is given to a broker to buy or sell
the currency at whatever the market is trading for at that moment. It can be an
entry order into the market or an exit order to get out of the market. Traders use
Market Orders when they are ready to make a commitment to enter or exit the
market. You must be very careful when using Market Orders in fast moving
markets. In fast rallies or down reactions you can gain or lose many points to
slippage before you receive your fill.

Trading is an auction where there are buyers (bidders) and sellers (offerers). The
bid is the "buy" and the "ask", or offer is the sell. Slippage is defined as: when a
trade is executed between a buyer and seller and the resulting buy or sell
transaction is different than the price you saw just prior to order execution. With
Market Orders you will lose on average one to six pips, if not more, due to
slippage. Market Orders are rarely filled at the exact price you are expecting. We
Recommend caution when entering or exiting with a Market Order.

Limit Orders: Limit Orders are orders given to a broker to buy or sell currency
lots at a certain price or better. The term Limit means exactly what it says. You
will buy at that exact limit price or better a large majority of the time. Limit Orders
are used to enter and exit the market. They are generally used to acquire a
specific price, avoiding slippage and unwanted order fills (execution price) which
can happen with Market Orders.

When you sell above the market, it is a Limit Order. When you buy below the
market, it is a Limit Order. A limit order will be executed when the market trades
through it. Seventy to ninety percent (70% to 90%) of the time, if the market is
must
trading at your Limit Order it will be executed. The market
trade through
guarantee
you specified Limit Order number to
a fill. The computer will notify you
within seconds of your fill. You do not have to call your broker to see if you have
been filled.

Stop Orders
: Stop Orders are orders placed to enter or exit the market at a
desired specific price. When you buy above the market, it is a Stop Order. When
you sell below the market, it is a Stop Order. Stop Orders turn into Market Orders
when the market trades at that price. Stop Orders as well as Market Orders are
subject to slippage, while Limit Orders are not.

The majority of Stop Orders are used as protective Stop Loss Orders. It is the
order you place with your entry order to insure an exit when the market goes
against you. A good trader never trades without a protective Stop Loss Order.
They are orders executed to get you out of the market when your trade has gone
10 Keys to
against you. Protective Stops are discussed separately as one of the
Successful Trading.

One Cancels the Other (OCO)
: Whenever you enter the market, you must exit
the market at some future time. An OCO order is a procedure and means
one-cancels-the-other. Once you have entered the market, you should place a
protective Stop Loss Order and have in mind a projected profit target. That
projected profit target can be your Limit Order. If you simultaneously place both
Limit and Stop Loss Orders when you enter the market, you can OCO them and
walk away from your computer. What does that mean? At some future point in
time either your Stop Order or Limit Order will be executed, automatically
canceling your opposing order. If the trader is so sure about the trade, he can
execute an OCO order and walk away from the trade. The computer will than
manage the trade.

Cancel/Replace Orders
: A Cancel/Replace Order is a procedure and not an
entry or exit order. By definition it is when the trader cancels an existing open
order and replaces it replace it with a new order. A cancel/replace order is
primarily a strategy of trading and is predominately used after one has taken a
position in the market and wants to stay in the market locking in profit. For
example: you buy Swiss at 1.420. Your protective Stop Loss Order is 1.400. The
market moves in you direction as projected. You now want to reduce your potential loss, so you cancel your Stop Order at 1.390 and replace it to 1.410 where you got in. You are now in a trade with no risk. As the market moves further north in your direction, you now want to lock in more profit. You cancel your 1.410 Stop Loss Order and replace it with a new 1.440 Stop Loss Order.
You now have locked in 30 Pips in profit. You are in an all-win, no-risk trade. You
keep canceling and replacing your Stop until you are finally stopped out. This is called stop loss.