As forex traders we have options. Just as traders in other markets may decide to take a market trade, place a limit order or place a stop order, we forex traders have these options. When we decide to trade we may enter a:
1. Market Trade: A trade is taken at the current price.
2. Limit Order: A trade order is placed expecting the market to retrace before moving in the expected direction.
3. Stop Order: A trade order is placed so that when the market moves in the expected direction the order is triggered.
The market order is ideal if the market is offering a reasonable price and it looks like the market may move in the expected direction soon. If, however, the market does not immediately move in the expected direction, a market order may end up being a bad idea.
As traders, it is our job to think about ways to become more profitable. One simple way to become more profitable may be to use stop orders.
The limit order is nice if the trade eventually moves in the expected direction. The limit order is great for getting in a trade at a “cheaper price.” If the trade works out, a limit order is brilliant.
The stop order is only triggered if the market moves in the expected direction. Think about this for a second. The order is only triggered when the market moves in the expected direction, if the market goes in the “wrong” direction, the stop order is not triggered. Using this type of trade order may reduce the number of losing trades, particularly those trades that immediately move in the “wrong” direction. For more about stop orders, please watch these videos.
