Aug
15
2009

Types of Market Orders (Part I)

Currency traders use market orders to catch market movements when they are not in front of their screens. Just to remind you that forex markets are open 24 hours a day, five days a week. A market move is just likely to happen while you are asleep or in the shower as while you are sitting in front of your computer screen.

Market orders are very critical to your trading success. Think of the different types of market orders as trades waiting to happen. If you enter an order and the subsequent price action triggers its execution, you are in the market so be as careful as possible while playing with the market orders. Trading can be very difficult without these market orders.

Professional currency traders routinely use market orders to capture sharp short term price fluctuations, limit risk in volatile or uncertain markets, implement a trade strategy from entry to exit and preserve trading capital from unwanted loss. Market orders are essential for maintaining trading discipline.

Currency markets can be notoriously volatile and difficult to predict. There can be sudden price swings. Using market orders can help you capitalize on short term price movements while limiting the impact of any adverse price movements.

You probably dont have a well thought out trading plan if you dont use market orders. It will also give you the peace of mind in trading. There is no guarantee that the use of market orders will limit your losses and protect your profits in all market conditions. However, a disciplined use of market orders will help you quantify the risk that you are taking.

A number of different types of market orders are available to currency traders in forex markets. You should add the market orders to the list of questions you need to ask the broker when you open an account with a forex broker because you should know that not all market orders are available at all online forex brokers.

Take Profit Orders: When you have an open position in the market, use the take profit order to lock in profits. There is an old market saying, You cant go broke taking profits. Suppose you are short GBP/USD at 1.2354. Your take profit order will be to buy back the position and be place somewhere below 1.2334. Making you a profit of 20 pips! If you are long EUR/USD at 1.2845, your take profit order will be to sell the position somewhere higher close to 1.2875.

Limit Orders: Dont forget the saying, Buy low and sell high. A limit order is any market order that triggers a trade at more favorable levels than the current market price. The limit order must be placed somewhere above the current market price if the limit order is to sell. The limit order must be entered somewhere below the current market price if the order is to sell.

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