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Why is it important to know the different types of orders in the Foreign exchange market? Automation is quite common in Forex trading. Due to the fact that the market’s operation is continuous, 24 hours, 5 days a week, there is a high need for automation as a monetary value can change drastically from one moment to another. But since traders are humans too, they cannot manage their positions throughout the entire trading hours.

In situations like this, market order proves to be useful. Orders in the forex market are the very tools that traders use to be able to passively manage their positions while it is still active. Using these tools, traders can ensure that their trade values are safe within bounds even as the market moves, 24 hours a day.

Different Types of Orders

Market Order – this type of order is being played often in the Forex market. A market order is used to buy something based on the current market price. For instance, you want to buy something online. You will see this ‘Buy Now’ button. This button is similar to the one that’s found in the Forex market.

When this order is activated, it will automatically find the best price deals in the market then it books your order over that particular price. Take note, a market order can become an open position instantly.

Pending Order – this type of order is a set of instructions as to when to buy or sell in the market. This order will only be activated after certain conditions get fulfilled. Because of that, Pending Order can be considered a conditional market order. Until such time that these pending orders get executed, they will not be included in the margin calculations.  Orders such as Pending Orders ought to provide less manual intervention.

Profit Booking Order – this type of order is used to square odd those long open positions. Profit Booking Order lets traders book their profit in the financial market where the prices change very quickly.

Stop Loss Order – this order is the counterpart of the profit booking order. However, this Stop-Loss Order is widely used in the market compared to the Profit Booking Order. In this type of order, the trader specifies the threshold of prices that he is willing to bear. This is a very effective means to prevent losses and could act faster than manual intervention.

Trailing Stop Order – this works the same as the stop-loss order. This just means that this order sells an open position whenever a certain price hits its limit. For instance, you created a trailing stop order when the price market goes below 10%. On the next day, you can expect that the value will be increased by 15%.

Dependent Orders - In the foreign exchange market, traders are also allowed to create their own dependent orders. With this order, the trader can have two simultaneous orders but only one will be executed based on the conditions of the market. This Dependent Order can also be used in designing complex Forex trading algorithms.