The advantages of the Forex market are large daily volume and high liquidity and that is open 24 hours a day, but these advantages may also mean higher risk. However, the Forex market, unlike other financial markets, there are mechanisms to prevent it. Using Stop Loss and Take Profit orders, investor prevents fluctuations and keeps your profits. Basic orders (market, stop loss, and limit order) are usually all you will ever need to be trading on the FOREX. Do not complicate life for themselves and make trading systems with a large number of different orders unless in this aggressive market you are not a professional.
Stop Loss
As noted, the Stop Loss function keeps open positions of possible market fluctuations, which prevents the growth of risk. Stop Loss will automatically close the account when the exchange rate falls below the entered level and prevent losses. Stop Loss Order instruction to the trader to buy or sell a currency pair when it trades beyond a specified price. A buy order is at a price that is higher than the current market price, the sales order is the price which is lower than the current market price. They serve to protect the dealer profits or limit your losses. “Stop” becomes a market order when executed so that it is possible that the order does not execute but not guaranteed. In times of extreme volatility execution of the order may be difficult or impossible.
The level of stop loss above or below the current price, which moves with varying prices. For a long position, will be placed below the current If the price falls and reaches stop loss and the position will be closed. As long as the price remains above a traveling stop, the position is held. Indicators, such as moving averages, can be used to set a traveling rate so that the “stop” becomes a market order, or that he can’t perform at a certain price. Thanks to this, the initial risk can be estimated but not guaranteed.
Take Profit
This function keeps open positions of market instability. Profit is hereby discontinuity and thus protects against excessive fluctuations that sometimes cause blocking orders. An order to close a specific position on a specific site in the event that the price moves in a favorable position; can be made only on the Bid price and placed above the Bid price with reference to Buy orders; may be only the Ask price and placed below the current Ask price with reference to Sell positions.
Stop-loss order is a limit order linked to an open position with the purpose of preventing additional losses if price goes against you. Stop-loss order is worth until the position is liquidated or not until you cancel the stop-loss order. For example, you bought EUR/USD at the price of 1.08255. To limit your maximum loss, set a stop-loss order at 1.07900. This means, if the market went against you and the EUR/USD falls to 1.07900 instead to jump as you guessed, your trading platform will automatically execute an order for sale to 1.7900 and close the position at a loss of 35 pips. Limitation of loss is very useful if you do not want to sit in front of computers all day. All of which you should be familiar is that before you enter a trade you have a clear picture of how much money you intend to lose in a given trade.
Spread the difference between bid and ask prices for the same currency pair. Generally speaking, the more liquid currency pairs (those with a large volume of transactions), usually have smaller bid/ask spreads. Less liquid currency pairs usually have larger spreads.
Take profit (Take Profit)
Take Profit is used to adjust the output when the exchange rate is moving in a positive direction. If you believe that the price of a currency pair that rises or falls to a certain level but do not know what to do after that, setting the Take Profit orders to close your trade when the currency reaches that position.
Example:
If you buy EUR at 1.08255. Price will be risen, you can set a Take Profit order to sell at 1.08900. When the market reaches 1.08900, your Take Profit order is executed and the position is closed.
The order stop loss (Stop Loss)
Stop Loss order allows traders to set an exit point for trade at a loss when defining their own risk and therefore are governed when trading. It represents an additional level of protection for traders, ensuring that it will not lose more than you can file if market position falls.
Example:
If you buy EUR at 1.08255. The price will be dropped to 1.07900 a stop loss order to sell at 1.07900 When the market will be reached 1.07900, the position will be closed.
Market order is an order to buy or sell at the current market price. For example, if the current rate of the currency pair EUR/USD at the price of 1.08250 if you want to buy at this price, you will be bought at exactly that price. Very simple, look at the price that suits you, click on the option to purchase and your position is open. Also all of this is true in case of sale.
A limit order is an order placed on the way to buy or sell a currency pair. It has price and duration. For example, EUR/USD is currently at the price of 1.08250 and you want to buy if the price will come to 1.08500 In this case, you can set a limit order at 1.08500 (then you can walk away from your computer and to address other issues). If the price reaches 1.08500 Your platform will automatically execute an order to buy exactly at that price. You specify the price at which you want to buy or sell a particular currency pair and specify how long you want the order is worth (in time). If the price reaches the specified level, or a desired time, the order will not be executed.
GTC (good until cancelled) order remains active in the forex market until you decide to kill it. Your broker will never cancel the order. Your responsibility is only that you remember that you have an account on the market.
Daily order remains active in the forex market by the end of the trading day. Since the foreign exchange market is open 24 hours a day. It usually means 24 hours or midnight our time, but we would recommend that you still check the correct time with your broker.
We will give an example to give you the whole thing was clear. Price EUR USD is traded at 1.08250. If you want to buy at 1.09200 above the resistance it is expected punching or sell if the price falls below 1.06000 as the line (support), depending on what price will the first to touch our set price, one position will open a second account will be deleted.
Forex Supports and resistances levels
1.10400 resistance
1.09850 resistance
1.0915 resistance
1.09250 last
1.06550 support
1.06150 support
1.05750 support
There is no fixed order size (lot) for purchase, On the Forex market, you specify the size of your order. This allows traders participate in the market with accounts from $ 100 with most brokers, although a broker where the minimum bet even $1. There are combined orders with the price and the closing price restrictions. When you execute one of the orders, the other is automatically canceled. These orders can be applied to open positions, or can be used to open new positions. For example, let’s say that you believe that the quota pair EUR/USD currently at 1.08216/1.08255 will continue to grow. You think that it will grow by at least 50 pips if you exceed the value of 1.08800. However, you expect that prior to this growth, the price of steam traps on the value of 1.07800. You can set up an account with restricted entrance to 1.07800, but if the couple reaches that value before it starts to grow, you will not carry out a transaction. Therefore, setting up an order invalidating the other order to buy EUR/USD pair, if he reaches a value of 1.07800 or 1.07900. The first price offered on the market, which reaches one of these two values will initiate tasks. Order to limit loss and limiting the order placed on an open position also represent a type of order that cancels the other order. When any of them is executed, the other is automatically canceled. It is needed to be careful and cautious when you set stop/loss or take profit order. There are a lot of types order we mentioned and explained here. The purpose of stop/loss order is to protect the capital of potential losses. The purpose of take/profit order is to enable the desired profit.