Unlike instant execution orders, where a trade is placed at the current market price, pending orders allow you to set orders that are opened once the price reaches a specific level, chosen by you.
In this lesson you will learn:
When trading the financial markets, there are essentially two ways to open a trade.
Instant execution: your trade is opened immediately at the price available
Pending order: your trade is opened when a market reaches a specific level, chosen by you
Over time, you’ll probably find that you use both types of transactions in your trading. But how exactly do pending orders work, and why are they needed?
The fact is that always being up-to-date with market news and significant moves is important, but good planning is even more important. When you have your own view on a particular market, but don’t have the time to constantly monitor prices manually, pending orders might be a good solution.
Unlike instant execution orders where a trade is placed at the current market price, pending orders allow you to set orders that are opened once the price reaches a relevant level, chosen by you. There are four types of pending orders available within xStation 5, but we can group it to just two main types: orders expecting to break a certain market level or orders expecting to bounce back from a certain market level.
The Buy Stop order allows you to set a buy order above the current market price. This means that if the current market price is $20 and your Buy Stop is $22, a buy or 'long' position will be opened once the market reaches that price.
The Sell Stop order allows you to set a sell order below the current market price. So if the current market price is $20 and your Sell Stop price is $18, a sell or ‘short’ position will be opened once the market reaches that price.
The opposite of a buy stop, the Buy Limit order allows you to set a buy order below the current market price. This means that if the current market price is $20 and your Buy Limit price is $18, then once the market reaches the price level of $18, a buy position will be opened.
Finally, the Sell Limit order allows you to set a sell order above the current market price. So if the current market price is $20 and the set Sell Limit price is $22, then once the market reaches the price level of $22, a sell position will be opened on this market.
Opening pending orders
You can open a new pending order simply by double-clicking on the name of the market on the Market Watch module. Once you do so, the new order window will open and you can then select order type to “Pending order".
Next, select the market level at which the pending order will be activated. You should also choose the size of the position based on the volume. If necessary, you can set an expiration date (‘Expiry’). Once all these parameters are set, select a desirable order type depending on whether you would like to go long or short and stop or limit and select the ‘Place’ button.
As you can see, pending orders are very powerful features of MT4. These are most of all useful when you simply can’t constantly monitor the market, or prices change quickly and you don’t want to miss any market opportunity.
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