Undoubtedly, currency exchange trading is a well-rounded niche that requires in-depth knowledge of the subject and durable preliminary training. One of the initial things every broker should learn is to distinguish between diversified types of trading orders. It would be valuable to bear in mind that a selection of particular orders is drastically dependent on the Forex platform you are going to use for achieving your financial goals. In total, there exist about 10 diverse types of orders for various purposes.
If you are a full-time forex trader, you should know that any delay or the wrong type of order can promptly lead to notable overruns. Some orders are set up to assist the newcomer in eliminating breakouts or profits, others are claimed to protect your valuable cash, and some are applied to bring complicated business strategies to life.
If you have just stumbled upon this article in the initial stages of learning to trade on Forex, it is likely to be a real gem for you. Learning how to correctly navigate various types of orders is part of the comprehensive learning of Forex trading which will accelerate your learning journey.
How can we define the order in the spectrum of Forex commerce?
First, we need to come to basics. An order is a sort of command given to a forex dealer to purchase or sell an asset or a money exchange pair. By the time of performance, there exist several kinds of orders. The term market order can also be introduced in the Forex niche.
It is quite obvious that the transaction is not necessarily processed simultaneously. Rather, it is put off until the price reaches the value specified in the order. It should be added that most pending orders on the forex currency market are characterized as limit orders.
If I am a novice in the trading sphere, would I be able to understand the notion of an order?
It is noteworthy that a Sell Limit order is not promoted straight away upon reaching the exact price but awaits a reverse move. We would keep in mind a combination of four leading Forex orders on the marketplace:
- Buy Limit;
- Sell Limit;
- Buy Stop;
- Sell Stop.
In this article, we will concentrate our efforts on the explanation of the sell limit meaning in forex that can apply to newcomers in the trading industry.
Briefly, the Sell Limit can be interpreted as the order for purchase. In the Forex niche, it is suitable for short trades (sell). As a rule, a Sell Limit order is placed above the market price, since the trader aims to enter a bearish trend at the maximum correction. The situation is simple because this type of order requires minimum settings which can be considered a huge perk. What’s more, the order can also be removed at any time before coming into life.
What are the primary perks of Sell Limit?
A significant bonus of such orders is that they are available to be stored on the dealer’s server, not in the working terminal. In this case, the broker is not dependent on his computer. The order will surely be triggered when the price reaches the desired value.
A Sell Limit can always be canceled until it is activated; the attractiveness of the situation lies in the fact that it does not impose any obligations on the trader until it is executed. This helps minimize financial risk, particularly if there is no certainty that the trend will go on. If the price does not achieve the order, it simply will not be triggered, which will help prevent any sort of cash loss.
To add it here, the settings of this type of order can be altered effortlessly while the orders are in the pending status. You might agree that this option is convenient in case of an unexpected change in the market situation.
How does Sell Limit order work in practice?
In practice, Sell Limit orders are forced to be executed at the specified price, although the broker can boost the liquidity of the orders to take advantage of a particularly lucrative client. Let’s illustrate this case with a relevant example. Today, the GBP/USD currency pair is trading at 1.26567 and you expect the market to go down from 1.26998. For this reason, you place a pending Sell Limit order at 1.26998.
In this situation, a Sell Limit order is intended to be implemented when you want to sell at a higher price than the market can offer at present.
In the long run, a Sell Limit order is a specific trading tool, since if you use it wisely, it has the potential to erase the possibility of financial losses. It is recommended to make a bold move by applying a Sell Limit, especially in case of emergency, if the situation in the money market has changed dramatically and turned against you. Sometimes, Sell Limit strategies are risky, so keep in mind to set a Stop Loss to stay afloat.