A Forex broker is the intermediary between you and the Forex market. It provides you with an online platform for making your research and analyses, placing your trades, and monitoring the market. This platform is expected to be standard and to satisfy all your trading needs.
However, sometimes, especially for newbies, the platform can be too technical to use. This can result in many mistakes, causing beginner’s loss instead of beginner’s luck. The aim of this guide is to familiarize you with the common technicalities of online trading platforms.
Buy and Sell Orders
Buy and sell orders are basic functions that any Forex broker’s platform must have. In fact, a broker must be able to offer these two which are the minimum brokerage responsibilities. The duty of your broker, among others, is to link you to sellers when you want to buy and to buyers when you want to sell. Therefore, the buy and sell order functions are a must for any broker to have integrated into its platform.
An order is an instruction to your broker. When you want to buy, you click on the buy order on the trading platform. Conversely, when you want to sell, you click on the sell order. Buy and sell orders are of different types and can be market or limit. A market buy order, for instance, is an instruction to your broker to buy a currency pair immediately, at the current market price. Conversely, a market sell order instructs your broker to sell the pair at the current market price.
On the other hand, limit orders, as their name suggests, are “limited or restricted orders.” They are orders that direct the broker to buy or sell at the stipulated price, or better. That is, a limit buy order will be filled at the stipulated price or lower while a limit sell order will be executed at the stipulated price or higher.
While market orders guarantee that the orders will be filled, they, however, do not guarantee the execution price. Limit orders may not always be filled but they give traders better control on the price at which their orders are filled.
Stop Loss and Take Profit
For a Forex trader, there is almost no weapon more powerful to incorporate into your trading arsenal than stop loss and take profit. They are potent risk management tools that can keep you longer in the market than most of your peers. If your broker does not offer them (most brokers, however, do), you should ditch it and go look for a better one.
A stop-loss order, also simply known as a stop order, as the name implies, helps you stop your loss. It is an order to buy or sell a currency pair once the price hits a specified price known as the stop price. The broker immediately executes the stop-loss order once the price reaches the stop price stipulated by the client. This order type enables traders to prepare for any unexpected movement in the price of the currency that they are trading.
A take-profit order is used when you desire to take your profit once the price reaches a specified price. Usually, it is used together with the stop-loss order forming a powerful strategy of risk and money management. To use the take-profit order in your trades, you just have to enter it at a specific stop price above the current market price or the price at which your order is filled. Once the price reaches it, your position will be closed and your profit will be taken.
Notable modifications of both the stop-loss and take-profit orders are the trailing stop-loss and trailing take-profit. When traders adjust their stop-loss and take-profit orders based on the prevailing market conditions to further reduce their potential loss and increase their potential gains, they are using the trailing stop-loss and trailing take-profit orders respectively.
One Click Mode
On their platforms, most Forex brokers offer multiple trading modes. These include:
- Click and Confirm
- One-Click and
- Double-Click
Usually, for most Forex brokers, the Click and Confirm trading mode is the default mode. When your trading platform is in the Click and Confirm mode, every time you place an order, it displays a confirmation window for you to confirm you have entered the right parameters for your trade.
The One-Click mode executes all your orders at a single click. By improving the speed of order execution, it is especially useful for traders who trade the news and for scalpers as a split second can make a significant difference in the results of their trades. The Double-Click mode is similar to the One-Click mode but requires you to double click to make an order.
OCO
One-Cancels-the-Other order, popularly shortened as OCO, is a special type of order, a paired one, that directs the broker to automatically cancel the other once one is filled. They combine both stop and limit orders, thereby ensuring that once either the stop or limit price is reached, the other order becomes automatically cancelled.
Although not very common, the One-Cancels-the-Other orders can be an invaluable order type to use at moments when you are not sure of the direction of the market. In this way, they can help you to control risk and also to better time the market. They are extensively used to trade retracement and price breakout market moves.
Good ‘Til Cancelled (GTC) Order
Sometimes, enough market liquidity may not be present to fill your entire order at the best available price. Also, sometimes, for the same reason, the broker may not be able to fill your order at all. Although given its high level of liquidity, this is a rarity in the Forex market. However, a Good ‘Til Cancelled (GTC) order can help you ensure that your order will be eventually filled except you cancel it.
Good ‘Till Cancelled (GTC) orders can also be used as stop orders to sell a currency above the market price and as buy orders to buy the currency when the price goes below the market price.