Order Types and Placing Orders

 

Video Transcription:

Hey traders, welcome to Video 6: The Forex Beginners Course. This is Cory
Mitchell. In this video we are looking at order types and placing orders
brought to you by Investoo.com.

So there are three main entry order types; a market order which will fill
you at the current price, and it guarantees that you get into a position.
So this is for when you see a price you want, and you want in right now,
you don’t want to wait for a better price, or wait for a breakout or
anything like that, you want to get in right now, that’s when we’ll use a
market order.

A limit order is for when you want to buy below the current price, or you
want to sell above the current price. So I like to think of a limit order
as the price is currently moving away from where you want to buy it, or
sell it so you’re going to wait for a pullback, so the limit order is sort
of a pullback type entry.

A stop order, not to be confused with a stop loss is for when you want to
buy above the current price, or you want to sell below the current price.
So this would be, I like to think of the stop order as a breakout type
trade.

So let’s say there’s some resistance above, we’ll get into resistance and
support a little later in the course, but let’s say there’s a level up
above, and you think that if the currency pair, let’s say the Euro/USD
breaks that level it’s going to pop higher. In that case you want to buy
above the current level whenever that pop in price is going to occur, so
you’re not looking to buy it right now, you’re going to buy in the future
when it gets even higher.

So that’s what a stop order is, or say the price is in a range and you want
to buy the breakout of the range, you would put a stop order above or below
the range that way when the price reaches that level you’ll get into
position, so you’d put a buy stop above the top of the range, or a sell
stop below the bottom of the range, and that way if it does breakout you
can get into that trade.

So when the price of your limit order or your stop order is reached, those
orders become market orders. So you’re not, if you put out a limit order in
the Euro/USD let’s say at 136, it won’t necessarily fail at that level, it
turns, when the price gets reached it turns into a market order, so in that
split second if the price changes to 1.36001 you’re going to get 36.001.

Normally you’re going to get pretty close to the limit order, or stop order
you put in, but there is what we call slippage so you may get a slightly
different price. For each entry order we also attach a stop loss to it. So
a stop loss is different than this stop order, a stop order is just what we
call an order, an entry order that’s outside of the current market price,
whereas a stop loss controls our risk. So you want to attach a stop loss
and a profit target to each of our entries.

So a stop loss order is how we control risk, placing a stop loss is
required, because without it we can’t determine our position size. In a
couple of videos we’re going to look at precisely determining your position
size, so the stop is our first step in doing that.

Also without a stop loss a big move against us while we aren’t watching can
seriously jeopardize the account, so forex is a 24 hour market, if you just
buy into a position, or sell a position, and don’t place any sort of risk
management on that, you could have a big move overnight that could put you
in a big losing position. So we always cap our risk somewhere.

A stop loss is not guaranteed to fill at the expected price in a volatile,
or illiquid market conditions, or liquid market conditions and maybe
executed at worse price. So as the price approaches that stop target, so
your stop loss it’ll hit that level, and then that stop loss order becomes
a market order. So it’ll take whatever price it can get once that level has
been touched, and that could be significantly different, or it could be the
exact stop price that you put up.

During most market conditions you’re going to get the stop loss level that
you put out. If you happen to be trading right near news where you have a
huge move in a matter of seconds the stop loss level you expect to get may
not be actually what you are filled at.

A profit target is an optional order you don’t need to have one out, but we
typically attach it to our trades, and it is a place where we’re getting
out of our profitable trades at an expected level. So the profit target,
let’s say we’re risking $50 on a trade, and we want to get out of a
profitable trade where we make a $100, we would put that out at whatever
level that corresponds to, so that we actually get out with our profit that
we want on the trade.

So let’s look at a few examples, so here is the British Pound/U.S. Dollar,
it’s a 15 minute chart, and we are U.S. is close we’re in a quiet period
here which gives us a good opportunity to put out some orders, and try
things out. So one option is to go to, if you right click, and one click
trading you can change the amount that you want to trade, so this is set to
one standard watt, where you can train it to whichever you want.

And if you just click buy it’s going to pull up a market buy or market
sell, it gives you the current price, and you can decide if you want to buy
or sell. This option does not have an immediate stop loss or target to be
able to put in, you’re going to have to buy at the market, and then
manually put it in.

If we go to trading, sell limit whichever one. Remember if we want a limit
order, if we want to buy below the current price or we want to sell above
the current price, so let’s say we want to sell if the price reaches this
level up here 130, 16805, so we want to sell up there, so that would be a
sell limit, and let’s say we want to put a stop just above this high, so
168, we’ll move up a few pips, 16812, and then we want to take our profit
down here at 16785.

So just a random trade, we want to sell, price is there, and there we go.
So we can see this blue line represents our sell order, so if the price
climbs back up here we’re going to end up selling. Our stop is up here so
if the price continues to move up it’s going to stop us out with a loss,
and we can see what our loss is there, $70, seven pips.

We’re trading one standard lot, but if it comes up here, fills our order,
doesn’t hit that level and then starts to drop again we’ll get filled down
here, and make $200. These you can move around if you decide later that you
don’t like them, and we can also move the entry price as well. So that is a
limit order.

If we want a stop, let’s say we want to buy on a breakout of this high, so
we think if we go back here to this level, we can see the price went, moved
above this high, popped up a little bit, so if we’re expecting the same
thing we might want to buy as soon as the price pops above that level. In
that case we’re going to put out a buy stop.

So we can just click sell limit again, and then we can change it in here,
so we need a buy stop, because we’re buying above the current price, and we
are looking to buy at 16811, we’ll put a stop just a little bit below that
168 and a profit target of 16820. So here is our entry order, so as soon as
the price comes back up here, it’s going to get us into a long position, we
are expecting a pop up above this former high, so this is when a buy stop
would be applicable.

If we want to buy above the current price, so it’ll pop up, and this is our
target, if it keeps moving up it’s going to make us some money here 13 pips
for $132, or if it comes back, and then falls it’ll hit our stop, and we’ll
lose 110. Once again we can always adjust these quite easily, or if we
decide we want to give it a bit of room above the former high, or we want
to take it a little bit early, we can adjust that as well. So those are how
we do that.

We can also go in here, you’ll see that it shows up in your trade history,
so we have a buy stop out for one lot in the British Pound/U.S. Dollar at
the price we chose, stop loss target, and you can just double click on it
to change anything that you want. So you could go in change the price,
normally I’ll just use these to move them around, but if you really want a
very specific point, very specific price, you may need to go in there let’s
say if you want that changed to three, and you’ll get the confirmation.

One other thing that you’ll want to notice is that you do have the option
to put an expiry. Let’s say you’re a day trader, and you only want the
position to be filled today. If it doesn’t fill today, you don’t want it,
then you can put in your expiry time, and just choose today, and the time
that you want it to expire by.

So that is a good option to have, so that if you forget to put out, or if
you forget to cancel your orders when you’re done trading, you don’t go to
sleep, and then you wake up the next morning, and you have a bunch of
positions. So make sure that you either set an expiry if you don’t want to
be filled after a certain time, or you don’t need to set the expiry but
just make sure to delete the order if you no longer want it.

So very simple application for putting out orders, and the order types, and
how to put them out. Market orders are useful as well, this is a demo
account, so I could just show you, maybe we can take a smaller one, no just
one lot.

So if we go and buy at the market, as we can see there’s no stop loss, or
target out, so we’re going to need to put in our own stop loss. So let’s
say we want 16780, and 167, here let’s put 168. So that’s just how you
would do it if you wanted to do a market order. And then once again you
could adjust these based on where you want to get out of your order.

Typically you’re not going to want to reduce your, or expand your stop once
you’ve set a stop level stick to it. You don’t want to just keep adjusting
your stop level if the price is moving towards it, because you’re just
going to increase the amount of risk you have on a trade. So keep it where
it is, and we’re going to lose $10 in my demo account, so if you want to
close it out, you can just click close order.

So if you decide that you don’t want to wait for the price to hit your stop
or target this is effective right before news. If it doesn’t look like it’s
going to hit your target, or your stop before news, but you do want to get
out before news, especially if you’re just day trading, and you have a very
small stop like this, if a news announcement comes out it could, you could
be filled down here instead of at your stop loss, so if you want to just
close it out, you could just go close order, and close. Then you’re out of
the position, and you have nothing more to worry about.

So that’s how you handle orders, stops, targets, and how you use limit
orders, stop orders, market orders, and the next videos we’ll look at how
you actually decide where you’re going to put stops and targets. So until
next time, happy trading.

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