Our trading platform NAGA Trader is ideal for quickly and easily buying and selling Forex and CFDs (Equities, Index, ETFs, Futures, Commodities, and Cryptos), But before you get started, it's important to understand the different types of orders you can place and the options you have for setting the price at which you can trade. Find out more about all these in this article.
WHAT ARE ORDERS?
The term “order” refers to how you will enter or exit a trade. The most common types of trading orders are buy and sell orders. You can also place stop-loss sell and target buy orders, which are known as trigger orders and are more specialized orders used by advanced traders. Here we discuss the different types of orders that can be placed in the market.
Be sure that you know which types of orders exist and how they work.
A market order is an order to buy or sell at the best available price and it's executed immediately when placed. It is priced using the current market price. A market order immediately becomes an open position and subject to fluctuations in the market. This means that should the rate move against you, the value of your position deteriorates – this is an unrealized loss until the order is closed. For example, the bid (SELL) price for EUR/USD is currently at 1.1590 and the ask (BUY) price is at 1.1592. If you wanted to buy EUR/USD at the market, then it would be sold to you at the asking price of 1.1592. You would click buy and your trading platform would “instantly” execute a buy order at that exact price.
GOLDEN RULE IN TRADING
- Buy Orders - You always BUY (open) at ask price, you always SELL (close) at the bid price.
- Sell Orders - You always SELL (open) at the bid price and BUY (close) at the asking price.
- Remember - In the charts, you usually see the BID price (SELL price).
PENDING ORDERS (LIMIT & STOP ORDERS)
A pending order is an order to buy or sell, but only when certain conditions included in the original trade instructions are fulfilled. Until these conditions are met it is a pending order and does not affect your account totals or margin calculation.
The most common use is to create a pending order that is executed automatically via NAGA Trader if the price level reaches a certain level. When the conditions of the order are met, it automatically executes (as long as the trading account has enough available margin).
A pending order is an order placed to either:
- Buy or sell above the market at a certain price.
- Buy or sell below the market at a certain price.
- Example: Let's say that EUR/USD is trading at 1.2050. You want to go short if the price reaches 1.2070.
You can either sit in front of your terminal and wait for it to hit 1.2070 (at which point you would click a sell market order).
Or you can set a pending order at 1.2070 (then you could walk away from your terminal to attend that meeting you need to assist etc.).
If the price goes up to 1.2070, your trading platform will automatically execute a sell order at the best available price.
TAKE PROFIT ORDERS (TP)
A take-profit order automatically closes a position at the best available price. Take-profit orders are used to lock-in profits. For example, if you are long USD/JPY at 113.50 and you want to take your profit when the rate reaches 114.00, you will set this rate as your take-profit threshold.
If the bid price touches 114.00, the open position is closed automatically securing your profit. Trades are closed at the current market rate, in a fast moving market there may be a gap between this and the take-profit rate you had set.
STOP LOSS ORDERS (SL)
A stop-loss order is a defensive mechanism used to protect against further losses. It automatically closes a position at the best available price if the rate moves against you and reaches the level you specified. For example, if you are long USD/JPY at 113.50, you could set it at 112.00 - if the bid price falls to this level, the trade will close automatically.
Stop-loss orders can only restrict losses, they cannot prevent losses. Trades are closed at the current market rate, in a fast moving market there may be a gap between this and the stop-loss rate you had set.
You can easily set up a Take profit order or a Stop loss order using the NAGA Protector.