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For this purpose, there are several types of trading orders. The order is a command of the client to conduct a trading transaction. The terminal uses the following forex orders:. Execution of this entry order results in the immediate opening of a trading position.
This order is used to open a trading position when quotes reach a certain level. A pending order can be followed by Stop Loss and Take Profit orders. When a pending order is activated, Stop Loss and Take Profit types of orders are automatically attached to the open position. Such an order is always connected to an open position or a pending order. To check whether conditions of this order are met for long positions the Bid price is used, and for short positions the Ask price is used.
Execution of this order closes the position. A Take Profit order is always connected with an open position or a pending order. The price of a financial instrument has two values: Bid and Ask. The Bid is a price at which a financial instrument sells on the market. The Ask is a price at which a financial instrument is purchased. A client opens a short position or closes a long position using the Bid price. A client opens a long position or closes a short position at the Ask price.
The spread is the difference between the Ask and Bid prices. The time for processing customer orders is seconds. If market conditions are different from normal conditions, the order processing time may be extended. To open a position, a customer must have funds in their trading account. The size of the reserve is based on the amount of level. Stop orders. They are set following the expected price direction. But someone will consider the further uptrend to continue only when the price goes higher than level 1.
So, such a trader will set a stop order to buy at 1. It will be a less profitable trade, but the trader will act according to the trading strategy. To set a buy stop order, you need to set the price higher than the current one. Next, you set the price you want to sell at, which should be below the current price. If the price is at a level of around 1.
But the price can go in the direction opposite to the forecast after the stop order has worked out. The trader assumes that the price will grow but wants to buy cheaper. If the price drops to this value, the trader will buy more profitably. If the price continues to rise without a pullback to 1. But the price should be below the market, unlike the stop buy order.
In the case of the sell limit order, the entry price must be higher than the current market price. It means the trader expects an upward correction first and then a price drop. If the price is, for example, around 1. If the order works out, the profit will be higher than that yielded by the market or a stop order.
When you open a position by any order type, at first, the financial result will be negative:. This is due to the difference in prices at which other market participants are willing to buy or sell an asset. If I wish to immediately close the position, I can only sell the asset to the trader who is willing to buy it right away. The best price at which other Forex participants want to buy now is It is lower than the price I have entered a buy trade. To enter a trade, you must have enough money to maintain it margin even in day trading.
The higher is the leverage, the less is the margin. The bigger the trade volume contract size , the more money you need to open a position; it is a market axiom. In our example, we should have at least Let us study the example when the currency of the deposit and the currency of the purchased asset are different. It means I want to buy Litecoins for Bitcoins. Trader forums are full of information on how to enter a Forex trade correctly, but the "correctness" of any method, in my opinion, is subjective.
It all depends on the rules of the trading strategy and the personal trading style. The entry and wring points and rules will be different for positions trading and scalping. The strategy to open a position also depends on a trading asset.
The entry rules are different for currencies, precious metals, stock, and CFD. When you start Forex trading, it is more comfortable at first to have positions open than to close them. The first wishes of a beginner trader are usually like this:. Closed and open positions finance must be in balance. If you enter too many trades, sooner or later, there will be no free funds left on the account, which are necessary to ensure the next position. To open positions, you need to use The more positions opened you have, the less free fund available for operations.
It means that the number of positions you can open is limited by the deposit amount. It is a simple method of arithmetic mean. Suppose the loss on an open position is close to the difference between the deposit amount and the amount of collateral. In that case, the position will be closed by the system automatically. And from that moment on, I will no longer be able to open new positions on this instrument or others, as in the position diversification strategy, because I will not have enough funds to secure them.
So, the second rule of open position and closed position in Forex trading is risk management. You had better gain the profit gradually. It means you should enter several trades of small volume with low risk, not vice versa. The forex position volume is crucial for scalpers and intraday traders, as a single price swing in the opposing direction could ruin the entire deposit.
If the asset grows in value after opening a buy position, the closed position will record a positive financial result, i. If the asset depreciates after you enter a long position, the position closed will yield a negative result, i. With the sell position, the principle is the same. Closing position at a lower price will fix a profit for a trade. A short position closed at a higher price will record a negative trading result. You already know what is close position.
To close a buy position, you need to enter a sell trade of the same volume. For example, if you opened a buy position with a volume of 0. According to a close position meaning, you must accordingly buy the same amount of the asset to exit a sell order. For example, if you opened a long position and bought 0.
If you enter a long position and buy 0. In this case, the volume of the transaction closing the position is greater than the volume of the order that opened the position. The financial result of trades is always calculated only after the position is closed. The easiest way to close Forex open positions is exiting by market, i. When the position is closed by a stop loss, it means that the trade is exited automatically.
A stop-loss works out if the price goes in the opposite direction to the forecast. Such a stop order is called a trailing stop. If the price grows by 40 pips, the stop loss will be ten pips higher than the entry price. Differently put, as long as the price is rising, the stop loss will be at a distance of 30 pips below the highest price value.
The trailing stop tool allows protecting a part of the potential profit. In case the price trend reverses according to the trader's expectation of long-term price trend. Using the trailing stop, you can take the profit if the price trend has been originally going in the expected direction but turns in the opposite direction before it reaches the expected profit. Closing positions by a take profit means that your position is closed at the target profit level.
For a long position, you set a take profit at a higher price. For a short position, you set a take profit at a lower price. You put a take profit order at such a price level that the price should go to after opening a position.