Getting serious I – Order types in Forex Trading

After learning the basics, it is now time to get to the more serious stuff. You will now learn the mechanics of how to enter and exit a trade. Here we will discuss what are the order types in Forex trading. It is important to know how the different order types work in order to avoid bad surprises once you start trading. The different brokers support different type of orders, so it is important go get familiar with the possibilities of your trading platform. In any case there will be three basic types of orders:

Market order

A request to buy or sell at the best available price is called Market order.


A Market order is executed immediately, according to the available price and liquidity. Once the deal is confirmed, the market order becomes an open position. This means that you have exposure at the market, resulting in floating profit or loss, according to the most recent market price.

Market Order
Placing a Market order in MetaTrader 5

Market orders are usually placed very easy in most trading platforms, because there are big Buy and Sell buttons on the screen.

The quick trading window in MetaTrader 5

The benefit of using market orders is that you will know immediately if you are in a trade or not.

The drawback of using market orders is that you might get executed at a different price than the price you saw on the screen when clicking the button. This is the so called “slippage”. It is caused by fast price fluctuations and/or lack of liquidity on the market.

To summarize, you can use market orders when the markets are calm and you want to make sure you get into a position.

Limit order

The second most important of the order types in Forex trading are Limit orders.

A Limit order is a request to buy below or sell above the current market price when a certain price or better is available.


While Market orders are executed immediately, Limit orders are not. They are “waiting” for the current market price to reach them, before they get executed. This is why they are classified as “pending orders”. This means that when you place a Limit order, you do not have an open position. The pending order needs to be activated first and executed at the market.

Placing a pending Buy Limit order in MetaTrader 5

The benefit of Limit orders is that you guarantee yourself that you will enter the market at the the price you want or better. Entering in positions with limit orders guarantees you that you will not be surprised by a negative slippage.

The drawback of Limit orders is that you might skip a trade if the market price goes close to the price you want, but doesn’t actually reach it. In some cases this might be a matter of parts of a pip.

You use limit orders for entering the market when you believe the price will reverse upon hitting the price you specified. If you already have an open position, you can use limit orders as Take profit orders. This means that you place your limit order at the level you believe you should close your position and realize your profit.

A Limit order to BUY at a price below the current market price will be executed at a price equal to or less than the specified price.

A Limit order to SELL at a price above the current market price will be executed at a price equal to or more than the specified price.

Stop order

Stop orders are the third most popular order types t in Forex trading.

A Stop order is a request to buy above or sell below the current market price at a certain price.


Like Limit orders, Stop orders are not executed immediately. They are also “pending orders”. This means that when you place a Stop order, you do not have an open position yet.

Placing a pending Buy Stop order in MetaTrader 5

The benefit of Stop orders is that you can enter the market at a the price which is worse than the current market price. You are certainly thinking now: “Why on earth would I want to enter the market at a worse price?”. This order type is useful when you are looking for a breakout.

The drawback of Stop orders is that there is a possibility of a slippage. In contrast to the slippage of Limit orders though, the slippage of stop orders is negative for you.

You use limit orders for entering the market when you believe the price will move in a certain direction, but needs to break and confirm some level (a breakout). If you already have an open position, you can use limit orders as Stop loss orders. This means that the stop order will protect you from losing more than planned.

A Stop order to BUY at a price above the current market price will be executed at a price equal to or more than the specified price.

A Stop order to SELL at a price below the current market price will be executed at a price equal to or less than the specified price.

Now when you are familiar with the basic order types in online trading, you can go ahead and learn how to do basic calculations.