Types of Forex Orders - A Comprehensive Guide from A to Z

If you engage in Forex trading, you will notice that Forex trading platforms offer various types of orders. However, not everyone fully understands the utility of these orders and how to place orders in Forex most accurately. Therefore, in this article, we will guide you in detail about the types of orders in Forex so that you can apply them effectively in your trading process.

Contents

1 Guide to the Types of Forex Orders

Guide to the Types of Forex Orders

Each trading platform designs different types of Forex orders. Fundamentally, they are not too different from each other (sometimes only differing in name). The most common orders include:

Market Order (Immediate Execution)

A Market Order, also known as a market execution order, means that the order will be executed immediately at the current market price.

This is one of the types of forexorders that many traders prefer, especially scalpers, aiming to catch up with market trends without missing opportunities.

Pros

Quick and immediate entry, no waiting required.
Easy to place an order, without many complex operations.

Cons

Sometimes you may not get the best entry price.
Especially when the market fluctuates rapidly, it can differ a few points from the price you see when you are about to enter the order.

Buy Limit Order

A Buy Limit Order is also known as a pending order to buy at a lower price. This allows you to place a BUY order at a price you desire, which is lower than the current market price, and the order will only be activated if the price reaches that level.

Sell Limit orders are often used to enter a BUY/LONG during a retracement in an uptrend.

Example of a Buy Limit Order:

Suppose you want to BUY EUR/USD.
The current EUR/USD exchange rate is 1.1234.
But you think that the price could correct to a lower level before going back up, so you would want to BUY at a price <1.1234, for instance, at 1.1200.
At this point, you need to place a BUY LIMIT order at the price of 1.1200.

=> The BUY LIMIT order will be triggered if the EUR/USD rate drops to 1.1200 or lower.

Pros

You can BUY at the lower price that you desired.
It saves time as you do not have to monitor the prices constantly to place an order.
It improves psychology, limiting the FOMO of BUYing too early at high prices.
It reduces your risk of loss (because you BUY at a lower price).

Cons

There is no guarantee that the order will be executed, as in many cases the price may not decrease to the level of your Buy Limit order.
If the Buy Limit order is not executed, and the price continues to rise, it means you have missed the opportunity to BUY and make a profit.

Buy Stop Order

Buy Stop Order is a pending order to buy at a higher price, set ABOVE the current market price level. If the price reaches that level, your BUY order will be executed

Among the types of orders Forex, the Buy Stop is considered the most complex because many find it counterintuitive, wondering why one would choose to buy at a higher price instead of at a lower price range.

Buy Stop Order is often associated with those who apply resistance levels in their trading strategies. (Resistance is the price point to which the price increases and then starts to decrease again. However, if the price keeps rising past the resistance, it is expected to continue its strong upward trend).

To understand this better, let’s look at the example below:

Suppose you are trading the USD/TRY pair (U.S. Dollar and Turkish Lira).
The price of USD/TRY typically reverses its course when it hits around ~5.85. In theory, the ~5.85 zone can be considered a resistance level for USD/TRY.
You could place a Buy Stop order just above the 5.85 level (above the resistance). If the price goes above 5.85, it would be seen as breaking through the peak and starting a new upward trend. Your order would be executed.
However, if you set a Buy Limit order in this scenario (at a price below 5.85), your order would be immediately executed even if the price hasn’t risen to 5.85 yet (because a Buy Limit order fills at prices ≤ your set price).

Note that when placing a Buy Stop order, set the price a bit above the resistance level to avoid a fake breakout (which occurs when the price momentarily breaks through the resistance level but then falls back down, potentially leading to a loss on your BUY order).

Pros

You may achieve the most favorable entry point at the beginning of a new upward trend.
It saves you time, gets you ahead of the rising trend, and avoids tying up capital in a low buy without knowing when the price will start to increase significantly.

Cons

There’s no guarantee of winning because if you misjudge the resistance level, or if in many instances the price rises above the resistance and then falls right back down – you will face a loss.

Sell Limit Order

A Sell Limit order, also known as a pending sell order at a high price, allows you to place a SELL order at a desired higher price level than the current market price, and the order will only be activated if the price reaches that level.

Among the order types in Forex, Sell Limit is one of the most frequently used by traders. Sell Limit orders are typically used to sell or short during pullbacks in a downtrend.

Example of a Sell Limit Order

Suppose you want to SELL EUR/USD, and the current price is 1.1234.
You think the price might rise a bit more before reversing and going down, so you want to SELL at a higher price level.
You would place a Sell Limit order at a price > 1.1234, for instance, at 1.2220.

=> You would place a Sell Limit order at a price > 1.1234, for instance, at 1.2220.

Pros

You get to SELL at the high price level you desire.
It saves you time as you do not have to monitor the prices continuously to place an order.
It improves psychology, limiting FOMO when SELLING too early at a very low price.
Reduces your risk of loss (because you sell at a higher price level).

Cons

There is no guarantee the order will be filled, as there are many instances when the price may not reach the level you have set for the Sell Limit order.
If the order is not filled and the price continues to fall, it means you have missed the opportunity to SELL and make a profit.

Sell Stop Order

A Sell Stop order is a type of order to sell at a lower price than the current market level, set below the market’s current price. If the price falls to that level, your SELL order will be executed.

Example of a SELL STOP order:

Suppose you want to SELL EUR/USD. The current price of EUR/USD is 1.12345.
However, you only want to SELL if the EUR/USD reaches a price lower than 1.12345, for example, 1.12000.
You would place a SELL STOP order at the lower price of 1.12000.

=> The SELL STOP order will be activated if EUR/USD touches 1.12200 or lower.

Now you might wonder: Why would one want to SELL at a lower price? Wouldn’t selling at a higher price be better?

This relates to support zones in technical analysis (support is an area where the price, when falling to it, tends to bounce back up. However, if the price breaks through support, also known as a breakout, there is a high probability it will fall further – according to technical analysis).

Let me give you a more detailed example. Consider the following chart:

Suppose you are trading the USD/JPY pair.
The price of USD/JPY typically bounces back up after reaching around 112.2. Theoretically, the 112.2 area can be considered a support zone for USD/JPY.
You can place a SELL STOP order just below 112.2. In this case, if the price drops below 112.2, it is considered a support break, and a new downtrend begins. Your order will then be executed.
However, if you set a SELL LIMIT in this situation (for a price slightly below 112.2), your order would be executed immediately without the price dropping below 112.2 (because SELL LIMIT prioritizes execution at a price ≥ the price you set; it won’t wait for a lower price).

Pros

You may get a good entry point at the “start” of a downtrend.
It saves you time, allowing you to catch the downtrend early, without being stuck in a position if you had set a SELL at a higher price.

Cons

There is no guarantee of winning, because if you predict the support zone incorrectly, or in many cases where the price falls below support but then reverses upwards, you will incur losses.

Stop Limit Order

If you look at Types of Forex Orders on the MT4/MT5 applications, you will see two additional order types: BUY STOP LIMIT and SELL STOP LIMIT.

Các loại lệnh trong Forex. Lệnh Sell Stop Limit và Buy Stop Limit — Lệnh Sell Stop Limit và Buy Stop Limit

Sell Stop Limit and Buy Stop Limit orders function quite similarly to Buy Stop and Sell Stop orders that I just described above, but with some differences. I’ll illustrate using the case of Buy Stop and Buy Stop Limit.

Let’s say you plan to BUY the XAU/USD pair. The current resistance of XAU/USD is at 1730 (meaning that when the price hits 1730, it tends to reverse and decline, or if it exceeds 1730, it will likely continue to rise strongly.

If you want to place a BUY STOP order, you would set it at a price ≥ 1730, for example at 1735. Therefore, the STOP price would be 1735. When the XAU/USD price rises to 1735, your order will be executed immediately.
However, with a BUY STOP LIMIT order, you would still set the STOP price at 1735, but you could also set a LIMIT price at 1740. That means when the price exceeds 1735, a BUY order at 1740 would be activated.

IN SUMMARY:

A BUY STOP LIMIT order is a standard BUY LIMIT order, but it requires a condition to activate this BUY LIMIT. The main condition is that the price must rise to the level you set as the STOP price.

A Sell Stop Limit is an order to sell at a lower price, but with conditions to activate this SELL order.

Types of Orders Forex. Sell Stop Limit Order — Sell Stop Limit Order

Remember that:

For a BUY STOP LIMIT order: Market Price ≤ STOP LIMIT Price ≤ LIMIT Price (the price you will BUY).
For a SELL STOP LIMIT order: Market Price ≥ STOP LIMIT Price ≥ LIMIT Price (the price you will SELL).

Pros

Addresses the disadvantage of Buy Stop or Sell Stop orders – reduces the occurrence of false breakout traps (where price breaks resistance/support but then reverses direction).

Cons

Complex and difficult to use, suitable only for those who are proficient in order types above, and have some knowledge of technical analysis.

OVERVIEW

I have guided you through various Types of Forex Orders. Here is a summary of the key points you need to remember:

Market orders are executed immediately at the current price.
A Buy Limit is an order to buy at a lower price.
A Buy Stop is an order to buy at a higher price.
A Sell Limit is an order to sell at a higher price.
A Sell Stop is an order to sell at a lower price.
A Buy Stop Limit is an order to buy at a higher price, but with conditions to activate this BUY order.
A Sell Stop Limit is an order to sell at a lower price, but with conditions to activate this SELL order.

If you have any questions about Types of Forex Orders, feel free to leave a comment below for clarification. Thank you for reading, and I wish you successful trading.