Understand the Types of Pending Orders

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Understand the Types of Pending Orders

Post by arabyfx » Wed Nov 28, 2018 7:01 am

Understand the Types of Pending Orders

Before installing a Pending Order, you need to specify a level that is your target of execution. The target can be above or below the current price, depending on your type of Pending Order.

There are 4 types of Pending Orders commonly used in trading, namely Buy Stop, Sell Stop, Buy Limit, and Sell Limit. To facilitate understanding, the four Pending Orders will be divided into two main categories, namely Stop Order and Limit Order.
Stop Order
The principle of using this order is to target Open Buy above the current price, or Open Sell below the current price.
Limit Order
In contrast to the Stop Order, this type is set to target Open Buy below the current price, or Open Sell above the current price.
Limit Order Understanding
The most common mistake when you fail to install a Pending Order, usually located on the placement of prices that do not match the type of order. For example, when EUR / USD is at the price of 1.22418 and you choose Sell Stop, you just fill the price column with the level of 1.22420, which is clearly higher than the current price. Because Sell Stop functions to set an Open Sell target below the current price, the inclusion of the 1.22420 level is clearly not in accordance with the benefits.

Therefore, if you fail to install a Pending Order, the first thing that needs to be ascertained is the suitability of the price level with the type of order.

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2. Take advantage of Pending Orders to Support Strategies
Do you know? The diversity of Pending Orders can actually complement the trading strategy. Easy explanation like this:

When you install a Buy Stop Pending Order that sets an open position above the current price, you assume if the price will accelerate after breaking a level higher than the current price. The principle is similar to the goal of the breakout strategy, which only executes a buy signal after the price has broken the key resistance level.

That is why, the target level in Buy Stop is usually adjusted to the resistance that has the potential to be penetrated by price increases. As for Sell Stop, the target entry position is generally adjusted to the support level, which if broken can confirm further price declines.

On the other hand, using Buy Limit means you expect if the price will turn up higher after touching a level lower than the current price. Such reversal expectations are clearly aligned with the reversal strategy.

The price target in the Pending Order Buy Limit can be filled with a key support which you think can hold the rate of decline in price. The opposite applies to Sell Limit, because you can set an open trade target according to the resistance if you can limit the bullish price movement.
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One of the keys to successful trading is knowing the method or strategy that suits your style, and maximizing it as best you can. Therefore, when using Pending Orders, maximize the function with a reversal strategy or breakout. Always remember that Stop Orders are supporting breakout strategies, while Limit Orders are complementary to reversal strategies.

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