Chapter 3
Types of Orders
• Sellers are ASKing for a high price
• Buyers are BIDding at a lower price
• Trading is an auction
• Slippage occurs with most Market Orders
• The difference between the ASK and the BID price is the SPREAD.
A Trader must understand what each order is, what it and what part it plays in capturing profit.
A Forex Trader must use three (3) types of orders: a Market Order, a Limit Order, and a Stop Order.
The two, primary orders used for entering and exiting the Forex market are Limit and Stop Orders. Once
an order is placed, there are two critical procedures: One‐Cancels‐the‐Other (OCO) and Cancel‐and‐
Replace Orders. Properly understanding the procedures of order execution is a vital step to profitable
trading.
Remember: All good carpenters carry a toolbox. The sharper the tools, and the more skilled the
carpenter is at using them, the more effective they are. The sharper you become as a trader, the more
efficient and lucrative you will be.
Market Orders
A Market Order is an order given to a broker to buy or sell a currency at whatever the market is trading
it for at that moment. The Market Order can be an entry order into the market, or an exit order to get
out of the market. Traders use Market Orders when they are ready to make the commitment to enter or
exit the market. Caution should be exercised when using Market Orders in fast moving markets. During
periods of rapid rallies, or down reactions, gains or losses of many points may occur due to slippage
before receiving the fill.
Trading is an auction where there are buyers bidding on what sellers are offering. The bid is the buy and
the offer to sell is the ask.
Slippage
Slippage is a trade executed between a buyer and seller where the resulting buy or sell transaction is
different than the price seen just prior to order execution. On average, one to six pips will be lost with
Market Orders, perhaps more, due to slippage. Market Orders are rarely filled at the exact, anticipated
price. Market Traders Institute recommends caution when entering or exiting with a Market Order.
Limit Orders
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