Trading with pending orders on the market
Knowing and being able to set a pending order when trading is simply a must. The main advantage of pending orders is that forex broker will open a deal on your order, regardless of whether the trader is present at the terminal or not. Let's consider in detail the essence of pending orders, their types, advantages and disadvantages.
The essence of a pending order on
To begin with let's define the difference between a market and a pending order. The market order is a position opened by the broker at the current price in the market. The pending order is an order that will be opened by a broker at the moment the price reaches the level specified by the trader. This is the difference between a pending order and a market order.
In all other respects, pending orders or, in trader's slang, "pending orders" or "pendants" are no different from market orders. In the same way their volume, values are set. stop loss and take profit, the number of pending orders is unlimited. Additionally for pending orders you can set a date and time, after which the order that was not opened will be automatically deleted.
The pending order is set through the same orders panel as the market order. To do this, in the tab "Type" you must select "Pending Order", and then - actually, the type of the pending order itself.
Here it is worth noting immediately another feature of pending orders, namely modification. All parameters of a pending order placed by a trader can be changed or the order can be deleted altogether.
This is done as follows. All pending orders are displayed in the "Trade" tab below already open orders under the line "Balance". By clicking the PCM you can call the context menu, where you have to select "Modify or Delete Order".
In the menu of the modification it is possible to change the price of the order execution, stop-loss and Take ProfitThe order will be automatically deleted, as well as the date and time after which the failed order will be automatically deleted.
Types of pending orders on
Pending orders implemented in the trading terminal MetaTrader4 can be divided into two types.
Pending Stop orders
- BuyStop
- SellStop
Limit pending orders
- BuyLimit
- SellLimit
For clarity of understanding, a Stop type order is a trade at a price ALWAYS worse than the price at the moment the order is set. That is, to sell at a price lower than at the moment of installation of the order and to buy at a price higher than at the moment of installation of the order. To put it simply, the BuyStop order is always above the current price, the SellStop order is always below the current price.
Limit orders are a transaction at a price that is ALWAYS better than at the moment the order is set. That is, to sell at the price higher, than at the moment of installation of the order, to buy at the price lower, than at the moment of installation of the order. To put it simply, the order BuyLimit is always under the current price, the order SellLimit - above the current price.
Let's consider each pending order individually as an example.
Pending SellStop order
Suppose there are Flat in the EUR/USD pair. The price is within the channel boundaries, but we assume that soon there will be a breakdown of the lower boundary of the channel at 1.2728 and the downward movement will continue. We cannot sit in front of the terminal 24 hours a day and wait for this event to occur. Therefore, we instruct the broker to open a sell position for us. To do this, we set a pending order. What order should be set? We follow the scheme:
- Sell - that is, a Sell order.
- The current price is 1.2771. The price at which we will sell after the breakdown of the lower border of the channel - 1.2700. The price at which we plan to sell (1.2700) is worse than the current price (1.2771), the sell order is located under the current price, that is, the order type is Stop;
- As a result, we get a pending SellStop order at 1.2700.
Immediately when placing a SellStop pending order, or in the process of further modification, we set stop-loss and take-profit levels. As a result, we get the following: whether we have the terminal or not, whether it works at all or not, our broker will open a sell position when the price reaches the level of 1.2700 with the set stop-loss and take-profit parameters.
Pending BuyStop order
Let's take the same flat situation in the EUR/USD pair. The price is inside the channel, but we assume that in the near future there will be breakdown The upper border of the channel at the level of 1.2835 and the upward movement will continue. We entrust the broker to buy for us by setting a pending order. What order should be set? Again we go by the scheme:
- Buy - that is, a Buy order.
- The current price is 1.2762. The price at which we will buy after the breakdown of the upper border of the channel - 1.2850. The price at which we plan to buy (1.2850) is worse than the current price (1.2762), the order to buy is located above the current price, that is, the order type is Stop;
- As a result, we get a pending BuyStop order at 1.2850.
Directly at the time of placing the pending BuyStop order, or in the process of further modification, we set the stop-loss and take-profit levels. As a result, we get the following: regardless of whether we have the terminal or not, whether it works at all or not, our broker will open a buy position when the price reaches the level of 1.2850 with the set stop-loss and take-profit parameters.
Pending BuyLimit order
Suppose we have upward trend in the pair USD/CAD. We assume that in the near future the price will reach the trend support line at 1.1170, form a rebound and continue the upward trend movement. We instruct the broker to buy for us by means of a pending order. We determine the order according to the familiar scheme:
- Buy - that is, a Buy order.
- The current price is 1.1205. The price at which we will buy when the price reaches the trend support line is 1.1170. The price at which we plan to buy (1.1170) is better than the current price (1.1205), the buy order is located under the current price, that is, the order type is Limit;
- As a result, we get a pending BuyLimit order at 1.1170.
Directly at the time of placing the pending BuyLimit order, or in the process of further modification, we set the stop-loss and take-profit levels. As a result, we get the following: whether we have the terminal or not, whether it works at all or not, our broker will open a buy position when the price reaches the level of 1.1170 with the set stop-loss and take-profit parameters.
Pending SellLimit order
Suppose we have downtrend in the EUR/USD pair. We assume that soon the price will reach the resistance trend line at 1.3000, form a rebound and continue the downtrend movement. We instruct the broker to sell for us using a pending order. We determine the order according to the familiar scheme:
- Sell - that is, a Sell order.
- The current price is 1.2745. The price at which we will sell when the price reaches the resistance trend line is 1.3000. The price at which we plan to sell (1.3000) is better than the current price (1.2745), the sell order is located above the current price, that is, the order type is Limit;
- As a result, we get a pending SellLimit order at 1.3000.
Immediately when placing a SellLimit pending order, or in the process of further modification, we set stop-loss and take-profit levels. As a result we get the following: whether we have the terminal or not, whether it works at all or not, our broker will open a sell position when the price reaches 1.3000 with the set stop-loss and take-profit parameters.
The essence of trading with pending orders on the currency market
After getting acquainted with the types of pending orders, a beginner may have a reasonable question - if we are sure that the price will go in the right direction, why not enter the trade immediately, at the current price? As always, ForTrader.org magazine offers you an example.
We have the same flat in the EUR/USD pair. We assume that the price will break the lower boundary at 1.2730 and continue the downward movement.
It is possible to set a pending SellStop order at 1.2710, which will be opened when the price reaches this level. And it is possible, in the expectation to earn more money, to sell at the current price, which is much better for sale. However, as you know, the trader supposes and the market disposes. What will happen if the price does not break through the lower boundary level and rebounds from it, and continues to move to the upper boundary level? The pending SellStop order simply will not open and can be removed, and the trade opened at the current price will be closed by a stop loss.
Thus, trading with the use of pending orders gives the trader some insurance against the fact that the price will go in a different direction than expected.
It is worth noting that MetaTrader 4 terminal is arranged in such a way that you simply can not mix up the orders when installing, the terminal simply will not let you set, for example, SellStop order above the current price.
No broker charges absolutely no commission for the installation, modification or deletion of a pending order.
Also, a particularly important point when placing pending orders is spread. You must remember that the broker will open your position at the price you specified + spread (for buying) and - spread (for selling).
There are many strategies and trading systemsThe use of pending orders. The use of pending orders when trading on the trade saves the trader the need to spend a lot of time in front of the monitor, reduces emotional tension and makes it possible to plan trading activities clearly.