A basic knowledge in your forex traning to learn forex market in addition to market quotes, leverages and margins are orders. An order is an instruction to the broker to make a buy/sell deal at a time when price hits a certain level. Placing orders is a part of forex training; it develops the trader’s discipline. A trader must decide how much will be made or lost on every position.
A learner in forex market trading must decide what the target of his position is and the risk involved. If he does not start thinking this way, then sooner or later, an ill-judged position will wipe out his trading account. This is especially true if he is using leverage. The higher the level of leverage, the less room a position has to maneuver.
Anyone who is under forex training to learn forex market trading must note these two main types of order. These are stop-loss orders and take-profit orders. Stop-loss orders close one’s position when price has moved against his position and take-profit orders closes the position when it has reached a certain profit.
A learner in forex market must be able to utilize a number of different techniques such as chart analysis, risk management and trading psychology to be able to decide where to place orders.
On your forex training, one must understand that an order to buy or sell is known as a simple order because it tells the broker to do only one thing. However, a problem might occur when a stop-loss order is placed and a take-profit order is in an open position. Suppose the take-profit order closes the position, what happens to the stop-loss order? If they are both simple orders, the stop-loss order will remain active waiting for price to hit its level. When it does the order will open a position whether it is wanted or not. One can always remove the unwanted order manually, but it is not always convenient and it kind of defeats the object of orders. This is why one cancels the other (OCO) orders were developed.
OCO orders are normally placed on an open position and consist of two orders, a stop-loss order and a take-profit order. Remember in your forex training that if the take-profit is done, the stop-loss is automatically cancelled and vice-versa. There are also times when the learner in forex market wants to open a position when prices reaches a certain level and places stop-loss and take-profit orders on this position. This can be done with an If-done order. An if-done order is an order to open a position with a second order (either a simple order or an OCO) which only becomes active when the opening order has opened the position. One can adjust the levels of any active orders whenever he wants. For example, let us say he is long on the EURO. He sets an OCO. So he has a stop-loss and take-profit orders already in position. Prices start to rise and as they do he can raise the level of stop-loss to reduce the amount of risk. If prices continue to rise, and he continues to raise his stop-loss level, he will eventually get to the break-even level where the potential will equal to 0. If price still continues to rise and he raises the stop-loss level above break-even level then his order starts to protect unrealized profit and is then called a stop-trade order.
To finish it off, one who is under forex training and wants to learn forex market ordering must remember the following points:
- Orders are very important tools for the trader and one should familiarize oneself with them.
- It’s an excellent tactic to trail one’s stop-loss order in the direction of profit and reduced potential loss but should also never move the stop-loss orders in the opposite direction to accommodate a move in the hope that price will eventually turn in one’s favor. Otherwise the trading position will fail.
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