Chapter 4 TYPES OF ORDERS
A Trader must understand what each order is and does and what part it plays in capturing profit. As a Trader on the FOREX you use three types of orders: a Market Order, a Limit Order, and a Stop Order. The two primary orders you should use for entering and exiting the market are a Limit Order and a Stop Order. Once you have placed your order to enter the market, there are two procedures to that your need to understand. These are: One-Cancels-the-Other (OCO) and Cancel-and-Replace. Properly executing your orders and understanding these procedures play a very big part in your profitability. Remember: all good carpenters carry a toolbox. The sharper his tools and the more skilled he is at using them, the more effective he is. The sharper you are as a trader the more effective and profitable you will become. The following explains in detail what each order does. You must clearly understand what each order does before you start to execute your orders.
Market Orders: A Market Order is an order that is given to a broker to buy or sell the currency at whatever the market is trading for at that moment. It can be an entry order into the market or an exit order to get out of the market. Traders use Market Orders when they are ready to make a commitment to enter or exit the market. You must be very careful when using Market Orders in fast moving markets. In fast rallies or down reactions you can gain or lose many points to slippage before you receive your fill. Trading is an auction where there are buyers (bidders) and sellers (offerers). The bid is the "buy" and the "ask", or offer is the sell. Slippage is defined as: when a trade is executed between a buyer and seller and the resulting buy or sell transaction is different than the price you saw just prior to order execution. With Market Orders you will lose on average one to six pips, if not more, due to slippage. Market Orders are rarely filled at the exact price you are expecting. We Recommend caution when entering or exiting with a Market Order. potential loss, so you cancel your Stop Order at 1.390 and replace it to 1.410 where you got in. You are now in a trade with no risk. As the market moves further north in your direction, you now want to lock in more profit. You cancel your 1.410 Stop Loss Order and replace it with a new 1.440 Stop Loss Order. You now have locked in 30 Pips in profit. You are in an all-win, no-risk trade. You keep canceling and replacing your Stop until you are finally stopped out.