How to Get Started in Forex Trading: Order Types

For beginners in forex trading, the market can seem like a complicated puzzle. You may not know how to start or what to do when you do get started. Maybe you have invested money with a forex broker and don’t know how to move it. This basic primer on order types should help clear up some of the confusion.

An order is the command made by an investor for a broker to switch into another currency. These orders usually are made as the result of a changing market or predictions in data that suggest that a particular currency is on the verge of gaining or losing value. To best capitalize on this shift, investors place an order with their forex broker. Here are a few different types of orders:

Market Order: Simply a forex trading order designed to buy or sell at current market price.

Stop-Loss Order: A pre-set order that is meant to cut off losses at a specific level. The investor tells the broker exactly when to bail out of a currency pair.

Limit Entry Order: An order to purchase below the market value at a specified level or sell above the market value at a specified level. This order is designed to take advantage of switching currencies at the moment they begin to lose value. A trader who initiates such an order predicts that the currency will reverse directions after that particular point, thus maximizing profit by buying or selling at that moment the currency hits that exact amount.

Stop-Entry Order: An order to buy above the market value or sell below the market at a specified price. This order is made when the forex trader believes a currency will continue in the same direction, meaning it is safe to buy if it is moving up and needs to be sold if it is falling.

OCO Order: The One Cancels Other order is meant to take the place of another order if executed, essentially canceling the other. This overrides previous orders.

GTC Order: A Good ‘Til Cancelled order will remain in the market until it is either filled or cancelled.

With this understanding of basic forex resources, you should have a better idea of how to invest your money. Knowing the specific order types is a good first step, but the next move is to find a forex practice account with which to get started. Practice accounts allow people interested in forex trading to try their hand at investing in the market without risking their actual money, making it safer to learn.