In each and every trade you are making an order to either buy or sell a currency pair.  Brokers will accept different types of order, however here we will describe the most used orders and how they work.

Market Order

A market order will buy or sell your desired currency pair at the best available market rate at that time.  At the click of the button you will instantly buy or sell the currency pair at the rate displayed.  For example if the bid price for AUD/USD is currently at 1.0316 and the ask price is at 1.0318 and you wanted to SELL then you would sell at the price of 1.0316 and if you wanted to BUY you would purchase at 1.0318.  In your trading platform once you click BUY or SELL you would get the corresponding rate displayed.

Limit Entry Order

A limit entry order is one where you will either buy below the current market of sell above the current market.  This allows you to set a specified price you determine before you buy or sell.  So many forex traders use charts and set levels to determine when a currency pair may rise or fall.  Therefore the AUD/USD pair may currently sit at 1.0368 and you believe that it will rise sharply once the price hits 1.0290.  You would therefore enter a limit entry order to BUY when the AUD/USD pair reaches 1.0290.  The limit entry order gives the trader flexibility to leave their trading platform to attend to life commitments while behind the scenes the trading platform will conduct a trade once the limit entry order is hit.

Stop Entry Order

This order is placed when you want to buy above the market or sell below the market at a certain price.  You may want to do this if you believe that a currency pair may tank further if it breaches a certain level.  Just lie a limit entry order, this type of order allows you to set orders so they may be triggered if you are sleeping or don’t have the time to sit and wait for it to happen.

Stop Loss Order

Given the nature of forex trading you will incur losses.  But it is important to limit your losses and never let losses get out of control whereby your trade might get wiped out and you may loose all your money.  A stop-loss order is your best friend to avoid this happening!!  This order is linked to a trade to prevent losses if price goes against you.

Stop losses are a must when you cannot dedicated hours and hours to sitting behind your computer or when very sensitive economic information is due to be released.  Prices can swing dramatically in the forex world and you must protect you orders against big losses.