Order types

Home » Order types

An order is an order from a trader to a broker to perform a trading operation. Such an order is executed by the broker implicitly, with scrupulous accuracy.

What is important to know in order to reduce the time between making a decision and executing an order by a broker?

Let’s figure this out by sequentially considering the trading situations in which the trader finds himself.

Having seen a similar situation, the trader identified a number of reasons for his forecast, determined the further movement and its purpose, the next action will be the formation of a market order (market execution – execution at the market price)

In the dialog box that opens, the trader will only have to select the volume of the transaction in accordance with the risk management plan, click “OK” – and the order with all the parameters generated by the trading terminal will be sent to the broker for execution.

Of course, no modern data transfer technologies will allow to reduce to absolute zero the time between sending by a trader (pressing the “OK” button) and receiving an order by the broker’s equipment – there is always a certain delay from half a second to a second.

Here we should remember about the number of market participants and the number of transactions made every second – it is this circumstance that changes the price (in the last decimal place) several thousand times per second.

This means that after receiving a request from a trader, the broker’s equipment compares the price in the request with the current market price and, in case of a discrepancy, again asks the trader for his consent to make a deal at the current price. This is how the process of re-quotation looks like. To avoid it and shorten the execution time of the order, it is necessary to set this parameter in the order:

In this case, the broker will know that the transaction can be made without requotes if the price is in the range of plus or minus 1.3 points from the specified one. This figure will increase in proportion to the volatility of the selected instrument: the higher the volatility, the wider the range should be set.

This situation occurs when the price has not reached the level at which, according to the rules of the trading strategy, it is necessary to make a deal.

In order not to wait at the monitor when the price becomes suitable (there will be a breakdown of the level or the price will bounce off it, etc.), you can give an order to the broker to make a deal at the price indicated by the trader. This is called a pending order. There are two types of such orders – stop orders (in the direction of continuation of the existing trend) and limit orders (set at the places of the predicted trend reversal):

The situation under consideration obviously involves the opening of a deal at the time of a reversal, which means that we will be talking about SELL-LIMIT orders.

To install it, select it in the context menu by right-clicking on the chart IN FRONT of the existing price:

after that, a dialog box will appear in which you need to specify the parameters of the placed order:

In the “volume” field, you should specify the volume of the transaction in lots in accordance with your risk management, and in the “price” field – the price at which the order will be executed by the broker. We have already determined this price after conducting a preliminary analysis, and it is displayed on the price scale, opposite the “horizontal line” element, as shown in the figure. There is a “distance in points” field in the dialog box below. Its value is calculated automatically, but can also be set manually, taking into account the local volatility of the instrument.

Detailed information about additional order parameters can be found in the instructions for the trading terminal.

Now you need to understand what a pending stop order is.

In the example given, there is a situation where the price is on the border of the channel, which in itself is a signal to conclude a deal, but the price has demonstrated its unwillingness to fall below a certain level, which is a contraindication to opening a deal for sale. In such a situation, a trader needs to wait for the price to break through the level in order to confidently open a position in the direction of the main trend, which will correspond to the postulates of technical analysis. Thus, it became necessary to place a pending SELL-STOP order.

Please note that to open the context menu, you need to right-click BELOW the current price, then fill in the appropriate fields in accordance with the instructions for the trading terminal and click OK.

Pending orders are a very convenient tool for interaction between a trader and a broker! Professional traders use it always, almost regardless of the trading strategy used. Please note that with the help of such orders, another important issue is solved – the psychological load – the emotional background when opening a position. All traders, especially beginners, know firsthand about the shadow of doubt that is present before pressing the button to submit an order to the broker.

In this case, the process of placing an order is accompanied only by the logic of analysis and attention to the parameters of the transaction, and the mind is not clouded by emotions, which significantly improves profit indicators for a certain period. Our team of professionals strongly recommends using this wonderful tool in your trading!

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent News
2 months ago
2 months ago
2 months ago