2Bull Forex Blog

Market orders should be used with care because in fast-moving markets there may be a difference between the price seen at the time a market order is given and the actual price of the transaction. This is due to slippage – the amount the market moves in the few seconds between giving an order and having it executed. Slippage could result in a loss or gain of several pips.

Limit Order – is an order to buy or sell at a certain limit. They can be used to buy currency below the market price or sell currency above the market price. When buying, your order is executed when the market falls to your limit order price. When selling, your order is executed when the market rises to your limit order price. There is no slippage with limit orders.

Stop Order – is an order to buy above the market or to sell below the market. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader expected. A stop-loss order will sell the currency if the market falls below the point set by the trader.

One Cancels the Other (OCO) – this order is used when placing a limit order and a stop-loss order at the same time. If either order is executed the other is cancelled, allowing the trader to make a transaction without monitoring the market. If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.

Example OCO Transaction:

Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280
Pip Value: 1 pip = $10
Stop-Loss: 1.3203
Limit: 1.3328

This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).

Here’s another example:

The current bid/ask price for US dollars and Canadian dollars is

USD/CDN 1.2152/57

…meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.

If you think that the US dollar (USD) is undervalued against the Canadian dollar (CDN) you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise.

This is the transaction: Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDN
Pip Value: 1 pip = $10
Stop-Loss: 1.2147
Margin: $1,000 (1%)

You are buying US$100,000 and selling CDN$121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.

However, USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US.

Because you entered the transaction by buying US dollars (buying long), you must now sell US dollars and buy back CDN dollars to realize your profit.

You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive 121,920 CDN for which you originally paid CDN$121,570. Your profit is $350 Canadian dollars or US$287.19 (350 divided by the current exchange rate of 1.2187).

A trader has at his disposal different types of orders to make FOREX trades. A clear understanding of each type of order is necessary to be a successful FOREX trader.

Market Order – is an order to buy or sell at the current market price. They can be used to enter or exit a trade.

If you want to get involved in the Currency Exchange trading market, then it is vital you know how to choose the best forex trading broker. More and more people are finding out that the forex market is extremely accessible to the small investor. It is a 24-hour a day market which can be accessed by anyone online and you don’t have to trade with large sums of money.

If you are exploring the idea of trading on the forex market then you may already know that it is the largest single market, trading 2.5 trillion dollars a day, more than 100 times the trading volume of the NASDAQ.

However it is necessary to go through a broker who will charge a fee for each trade you make. The broker acts as the intermediary between yourself, the trader, and the forex market. So what do you need to look for in order to find the best forex trading broker. There are three things which are very important for the home trader.

1. You broker needs to be regulated by an appropriate authority. In most countries this has to be the case by law. For example in the United States, all forex brokers are regulated by the Commodity Futures Trading Commission and must be registered as a Futures Commission Merchant. They must, by law, also be members of the National Futures Association. When looking for a broker, their credentials should be evident on their website. It is easy enough to go to the individual regulatory bodies website and then find out how you are protected.

2. As an online trader in a 24 hour trading market, it is essential that you have access to 24 hour support, online and by telephone so ensure your broker offers this. Before signing up, why not try calling the help line to ask for some further technical details about the service? This way you can better judge the quality of the support offered.

3. Ensure your broker trades in the five major currencies and any other currencies you are interested in trading in.

One other thing you can do is check out the brokers ratings and reviews. These are readily available online. The major brokers can be found in the Forex Broker List and the smaller companies in the online forex broker list of smaller forex accounts.

When first starting forex trading, you may also benefit from other services the broker may offer. These include telephone support from an adviser during live trading, video tutorials on how to use the software.

Upon choosing your broker you will need to enter into an agreement with them. This is because they will be guaranteeing your trades on your behalf and therefore they will expect to be able to intervene in your trades at any time.

Hopefully, if you choose the right forex broker for you, you will end up having a long and fruitful relationship. The next thing you will need to think about is the best forex trading robot so that you can trade even more effectively.