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FX Order Types
Welcome to the fifth in this short FX Education series, aimed at introducing new investors to the basic concepts of FX trading. In this edition we describe the different types of FX trade order.
Margin Order Types
The basic landscape in FX trading involves a number of order types that facilitate efficient transactions. Below, we have defined several of the most common terms.
- Limit
A limit order is commonly used to enter or exit markets at a specified price or better than the market price. In addition, a limit order allows the trader to manage the length of time that the order is current or outstanding before it is canceled. - Stop if Bid
A Stop if Bid order is used to buy or sell a currency is the Bid price breaches the specific level in the price field. Typically, Stop if Bid orders are used to buy a FX position in order to make sure a certain level is broken. - Stop if Offer
A Stop if Offer order is used to buy or sell a currency is the Ask price breaches the specific level in the price field. Typically, Stop if Offer orders are used to sell a FX position in order to make sure a certain level is broken.
Linking orders offers traders a logical aggregation of order types that outline contingencies in market participation, making it much easier to trade in moving markets. - One Cancels Other (OCO)
This most common linked order, OCO, stipulates that if one part of the order is executed, then the other part is automatically canceled. In FX trading, OCO often refers to a buy order and sell order linked together so that when one of the orders is executed, the other is canceled. Consider the OCO as follows: the trader protects an existing position from loss (stop order) and ensures that profits are taken (limit order). - If Done (ID)
These contingent trade orders, also known as slave orders become active only if the primary order is executed first. An example would be a working order to buy EURUSD at 1.2500 and a contingent order to sell at 1.2400 Stop if Bid – if the first order is done. - Trailing Stop
A Trailing Stop Order is a stop order that has a trigger price that changes with the spot price. As the market rises (for long positions) the stop price rises according to the proportion set by the user, but if the market price falls, the stop price remains unchanged. This type of stop order helps an investor to set a limit on the maximum possible loss without limiting the possible gain on a position. It also reduces the need to constantly monitor the market prices of open positions.