Master Forex Orders: A Practical Guide for Traders

To earn stable profits from Forex, you must master the trading order system. Placing orders incorrectly or at the wrong time is the reason 80% of traders fail. This article will help you understand in depth how to effectively use each type of order.

What Is a Trading Order?

An order is the primary tool you use to execute trading decisions on Forex. Each type of order serves a different purpose - from entering a position immediately to waiting for the price to reach a target, from protecting profits to limiting losses. Understanding each type of order will help you execute trades accurately and minimize risks.

Two Basic Types of Orders: Buy and Sell Orders in Forex

Market Order - Execute Immediately

A market order is an order executed at the current price as soon as you press the button. When you are monitoring the chart and see a good opportunity, you can buy or sell the currency pair right then without waiting.

Specific example: Suppose the EUR/USD pair is trading at Bid (the price the liquidity provider buys from you) is 1.32211 and Ask (the price the provider sells to you) is 1.32366.

• When you use buy order, you buy at the Ask = 1.32366
• When you use sell order, you sell at the Bid = 1.32211

This type of order is most suitable for scalpers or short-term traders. The advantage is you enter the trade instantly, but the downside is that you do not have full control over the price.

Pending Order - Trade According to Plan

Pending orders allow you to set an order at a desired price level and only execute when the price reaches that point. This is very useful when you are doing other tasks and do not want to stare at the screen all the time.

Limit Orders - Buy Limit and Sell Limit

Limit orders have two variants:

Sell Limit - Sell at a higher level: You place this order when you forecast the price will rise to a certain level, then you want to sell to take profit. You only sell at a price higher than the current market price.

Buy Limit - Buy at a lower level: Conversely, you forecast the price will decrease, so you place a buy order at a lower level than the current price. When the price drops to that point, the order will automatically execute.

This strategy is the “buy low, sell high” - the golden formula of professional investors.

Real example: EUR/USD is currently trading at 1.2432. You analyze that the price will continue to rise to 1.25, so you place a Sell limit at 1.25. When the price hits 1.25, the order will automatically fill. If you have a contrary view and think the price will drop to 1.23, you will place a Buy limit at 1.23 to be ready to buy.

Stop Order - Stop Entry Order

A stop order is triggered when the price reaches a level you specify in advance. You use this order when you want to enter a position after the price has moved in a certain way.

Buy Stop - Buy after the price increases: If you forecast the price will rise strongly, you place a buy at a higher level than the current price. The order activates when the price reaches or surpasses your specified point.

Sell Stop - Sell after the price decreases: Similarly, if you forecast the price will continue to fall, you place a sell at a lower level than the current price.

Example: EUR/USD is at 1.2323 and trending upward. You believe that when the price reaches 1.24, the upward trend will continue. Instead of watching, you just need to set a Buy stop at 1.24, then go about your work. When the price hits that level, the order will automatically execute.

Additional Orders - Account Protection Tools

Besides the two main types of orders, you need to use auxiliary orders to manage risk effectively.

Take Profit Order - Lock in Profits

A take profit order (Take Profit) is attached to the main trading order. When the price reaches your profit target, the order will automatically close the position and lock in gains.

• If you are BUY, the take profit order is a Sell limit
• If you are SELL, the take profit order is a Buy limit

Example: You buy EUR/USD at 1.2345 expecting the price to rise to 1.24. You set a Take Profit at 1.24. When the price hits this point, the position will automatically close, and you will earn 1.24 - 1.2345 = 55 pips profit. This is how you “lock in profits” when the market moves in your favor.

Stop Loss Order - Limit Losses

A stop loss order (Stop Loss) is a risk management tool that automatically closes your position if the market moves against you beyond a certain point. It helps prevent large losses.

• If you are BUY, the stop loss order is a Sell stop
• If you are SELL, the stop loss order is a Buy stop

Example: You buy EUR/USD at 1.2345 but want to hedge. You set a Stop Loss at 1.23. If the price does not rise as expected and drops to 1.23, the order will automatically sell, and you only lose 1.2345 - 1.23 = 45 pips. This helps protect your capital.

Golden rule: Always set a Stop Loss for every trade. This is how professional traders protect their money. Determine your acceptable loss level relative to your capital beforehand, then place the Stop Loss at that point.

Trailing Stop - Dynamic Trading

Trailing Stop is an advanced variation of Stop Loss. Instead of maintaining a fixed stop level, it automatically moves with the price at a chosen distance. This order type is very useful once you are in profit and want to maximize gains.

However: Trailing Stop is suitable for experienced traders. Beginners should avoid it due to high risk and unpredictability. The key is to keep your trading software open, because if you close it, the order will be canceled.

Example: You sell USD/JPY at 88.80 with a Trailing Stop of 20 pips. Initially, the Stop Loss is at 89.00. When the price drops to 88.60, the Trailing Stop automatically moves down to 88.80. If it continues to fall to 88.40, it moves down again to 88.60. The position remains open as long as the price does not exceed 20 pips from the lowest point.

How to Execute Forex Trading

On MT4/MT5 Trading Platform

Step 1: Click “New Order” to open the order window. Fill in the trading volume. For example, if you have a $1000 account, start with 0.01 lots for safety.

Step 2: Choose the order type - either “Market Order” (execute immediately) or “Pending Order” (waiting order).

Step 3: To close a position, right-click on the open order and select “Close”.

Effective Risk Management

When placing orders, always remember:

• Define Stop Loss first: Know your maximum possible loss
• Set reasonable Take Profit: Don’t be greedy; 2-3% profit per trade is already very good
• Use appropriate lot sizes: Only risk 1-2% of your account balance per trade
• Never skip protection steps: Every order needs a Stop Loss

Conclusion

Buy and sell orders in forex are the foundation of all trading. Deep understanding of different order types - from Market Order, Pending Order, Limit Order, Stop Entry Order, to protective orders like Take Profit, Stop Loss, and Trailing Stop - will significantly improve your trading skills.

Remember, Forex trading is not gambling. It requires skill, a clear framework, and discipline. Start with a small account, practice different order types, and gradually develop your own trading system. When you master how to use each order type, success will come naturally.