Written by Robert McKinley

How to Place a Forex Order

Whether you are trading in a demo account or a live "real money" account, when you are ready to make a trade, you will need to place an order with your Forex broker. You will place an order to start a new trade or to end a trade. So now, we'll talk about the types of orders that apply to the Foreign Exchange Market.

Basic Order Types

Market Order

This is an order to buy or sell at the current market price. If you wanted buy EUR/USD at its current price you would simply click "Buy" and your order would be executed, instantly, at the quoted price.

Limit Order

You use a limit order to buy or sell a currency at a specific price and only within a specific period of time. So, the order has two parts: price and duration. Here is how it works:

1. Your own analysis or your FOREX System indicates that it is a good time to buy EUR/USD if and when its price hits 1.3938 within the next two days.
2. You place a buy limit order and set the price at 1.3938 and you specify exactly how long you want the order to remain active.

By using the limit order, you can avoid having to sit in front of your computer while you wait for a currency pair to reach a specific price at which you want to buy or sell.

Stop-loss Order

This type of order does just what its name implies. It is designed to prevent additional monetary loss if an existing (open) trade goes against you. It remains in effect until the stop-loss order is activated (the position is liquidated) or until you cancel the order. Here is how it works:

1. You place an order to buy (go long) EUR/USD at 1.3938
2. At the same time, you place a stop-loss order at 1.3908 so that if your judgment is wrong and the trade goes against you (EUR/USD depreciates), you will not lose more than 30 pips. If EUR/USD depreciates to 1.3908, your broker would automatically execute a sell order and close your position for a 30 pip loss.

So this is one more type of order that relieves you from having to sit in front of your computer while you wait for something to happen. The stop-loss order is extremely useful and can prevent you from losing more than you can afford or want to lose.

GTC (Good ‘Til Canceled)

A GTC order is just what it sounds like: It remains active until you cancel it. There is nothing automatic about it. Once you have placed the order, it is up to you to keep your eyes on it.

GFD (Good For the Day)

If you want to place an order that will remain active only until the end of the day's trading, this is the one for you. For the U.S., this usually means it will remain active until 5 PM EST but check with your broker to be sure about this.

OCO (Order Cancels Other)

This type of order works with two other orders: a Limit Order and a Stop-Loss Order. When one of the two orders is executed, the other one is cancelled. Here is how it works:

1. The current market quote for EUR/USD is 1.3930.
2. Your own analysis or your FOREX Software indicates that it is a good time to buy (go long) EUR/USD if it hits 1.3938, or sell it (go short) if the price hits 1.3922.
3. You place an OCO order that tells your broker to buy at 1.3938 or to sell at 1.3922, depending on which price level is realized.
4. If the price hits 1.3938 a buy order will be triggered and your sell order will be cancelled. Or, if the price hits 1.3922 a sell order will be triggered and your buy order will be cancelled.

If you haven't already noticed, with an OCO order, the price of the buy order will always be higher than the current market price of the currency and the price of the sell order will always be lower than the current market price of the currency.

Trading Platforms

A trading platform is a fancy term for the software FOREX brokers provide for their clients to enable them to trade in the FOREX market. Trading platforms vary in scope and quality from broker to broker so it is important that you visit different brokers to compare their trading platforms. Also, after you choose a broker you should spend some time to learn how it all works and to become comfortable with everything before you begin trading.