Chapter 4 TYPES OF ORDERS
Limit Orders: Limit Orders are orders given to a broker to buy or sell currency lots at a certain price or better. The term Limit means exactly what it says. You will buy at that exact limit price or better a large majority of the time. Limit Orders are used to enter and exit the market. They are generally used to acquire a specific price, avoiding slippage and unwanted order fills (execution price) which can happen with Market Orders. When you sell above the market, it is a Limit Order. When you buy below the market, it is a Limit Order. A limit order will be executed when the market trades through it. Seventy to ninety percent (70% to 90%) of the time, if the market is trading at your Limit Order it will be executed. The market must trade through you specified Limit Order number to guarantee a fill. The computer will notify you within seconds of your fill. You do not have to call your broker to see if you have been filled. Stop Orders: Stop Orders are orders placed to enter or exit the market at a desired specific price. When you buy above the market, it is a Stop Order. When you sell below the market, it is a Stop Order. Stop Orders turn into Market Orders when the market trades at that price. Stop Orders as well as Market Orders are subject to slippage, while Limit Orders are not. The majority of Stop Orders are used as protective Stop Loss Orders. It is the order you place with your entry order to insure an exit when the market goes against you. A good trader never trades without a protective Stop Loss Order. They are orders executed to get you out of the market when your trade has gone against you.