Main types of orders in Interactive brokers

Trading order “Market” or “from the market”

A Market trading order allows you to buy or sell at the current market price in the fastest way. The price is not specified, but it is implied that the broker will execute the order at the best available price (under CFTC regulations, brokers are required to execute these orders at the best available price). However, when trading is uneven, with high volatility and low volumes, Market orders may be executed with slippage.

Forex order types and characteristics.

The time when a trader sets the price for purchasing or, on the contrary, selling a currency is usually called the “opening” of a Forex order. In view of the size of the cost, entry orders are divided into market orders, in which the opening of a position is carried out at the cost that is at a given time, and also deferred – the entry is carried out at a fixed cost slightly different from the current one.

Types of market orders

The market type of orders involves the purchase or sale of a currency or other type of asset at its current value. This can be either Ask or Bid. In this situation, it is best to familiarize yourself with some of the rules in more detail.

First of all, opening a transaction is mainly carried out at the cost that is most profitable for the trader himself. To put it in a more understandable language, pending types of orders function according to the same scheme.

It is further worth noting that the cost calculation at the current time is carried out automatically by the trading terminal itself.

Market orders open up a wide variety of business opportunities for a Forex broker.

The order is executed at a cost favorable to it. If the price begins to move towards the trader, then the trading terminal, whose role is played by the broker, sends a request to open an order at a different price. In this case, the trader must choose to accept the conditions or refuse. When the price begins to move in the opposite direction from what the trader wants, the order is executed.

There is one distinctive feature that gives significant superiority. It lies in the fact that orders are executed at the price requested, and not at the price that best suits the broker.

Classification of pending orders

BuyLimit – purchase order, reached if the assigned Ask price indicator is reached. In this case, the current value must exceed the requested value. In other words, when opening an order, the increase in value that follows a certain decline is taken into account.
BuyStop – a purchase order executed if the assigned Ask price indicator is reached. In this case, the current value should be lower than the requested one. This means that an order is opened when the price reaches the upper price indicator and also rises further.
SellLimit – a sales order carried out if the price reaches a certain Bid price indicator. The current value must be lower than that indicated in the application. An order is opened taking into account the fact that after a slight increase the price begins to fall.
SellStop is a sales order executed when a certain value is reached. Here, the current value must exceed the requested one. Such an order is opened when the price overcomes the lower level and begins to decline further.

Stop order

In fact, these are also pending orders - they just have a special name.

This type of orders is used to fix the value of income or loss at a certain level. This way, the trader can prevent significant losses if the rate changes sharply. The main types of stop orders are:

StopLoss in case of acquisition is set less than the current value, and if there is a sale, then vice versa, that is, higher. Its main task is to fix losses in the event that price movement is carried out in a manner that is not favorable for the trader. In this case, the order makes it possible to reduce the level of losses with a certain amount of the deposit if the trader cannot control the order and, if necessary, cannot react in the desired way.
In case of acquisition, TakeProfit is set higher than the current value, and in case of sale – lower. Used to record income. It is very helpful when a trader, for one reason or another, cannot timely fix income at a certain value when reached, which may cause the value to roll back in a direction that is not profitable for the trader.

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Stop order

A “Stop” order turns into a “Market” order as soon as a certain price level is reached in the market. Stop orders are often used to close positions to limit losses or protect profitable positions. A “Stop” order to buy is placed above the current market price, and a sell order is placed below the market price. If the market moves against open positions, “Stop” orders become “Market” orders and are executed, i.e. close open positions. For the MT terminal these orders are called TakeProfit and StopLoss.

We remind you that if you place a “Stop” order too close to an open position, then at the slightest unwanted movement of the market against it, it can be knocked out of the market. If you set it too far, you can lose significant funds from one open position if you do not guess the direction of the transaction. The most effective use of Stop orders, according to ForTrader.org magazine, is achieved by a thorough study and analysis of the daily trading range, volatility and volumes of the traded instrument (currency pair, futures, etc.), combined with risk management tactics and the size of the deposit.

In some terminals, including MetaTrader (Buy Stop and Sell Stop), a “Stop” order can work as a pending order, which is used to open positions at a price below the market to buy and above the market to sell. However, not all platforms support this format.

What is a pending order in simple words

Pending orders are orders that are executed according to a condition. There are two types of conditions:

limit (limit order);
stop (stop order);

These orders can be assigned a time after which they are automatically deleted.

Let's look at the differences between these applications.

2.1. Buy limit and sell limit orders

The most popular orders on Forex are limit orders. Buy limit - buy at a set price that is lower than the market. Sell limit - sell at a set price above the market.

Limit orders are the most popular among professional traders because they are the most profitable and predictable. The operating principle is as follows: a purchase/sale order is placed in advance at a price you choose. As soon as the price reaches its level, the order is executed. However, if the market price does not reach the level, the order will not be executed.

For example, let’s place a buy limit order to buy USDCHF at a price of 0.93250. Current prices:

Ask = 0.93510 Bid = 0.93498

As soon as the Ask price drops to 0.93250, a purchase will occur.

The “trick” of limit orders is that the order cannot be executed at a price worse than that specified in the order. It can be executed either at the specified price or even better if there is a “gap” or a sharp rise in price in the market.

It is also worth understanding the following. For example, if you place a buy limit order at a price of 0.93505, and the current prices Ask = 0.93510 and Bid = 0.93498, then the order will not be executed until the Ask drops to your level.

Note 1 If the price touches your order, this is not a guarantee that it will be executed. Theoretically, it is possible that too little volume will be sold at your price and the order will not be fully executed. If the Ask price falls below 0.93250, at least by 1 point, then this will be a guarantee that the order will be executed in full.

Note 2 In the stock market, the principle is the same, except that there is no fixed spread, like with Forex brokers.

2.2. Buy stop and sell stop orders

Buy stop and sell stop orders (buy stop and sell stop) - these orders are executed on the market subject to reaching a certain price.

For example, let’s place a buy stop order to buy USDCHF at a price of 0.94000. Current prices:

Ask = 0.93850 Bid = 0.93839

As soon as Ask reaches the level of 0.94000, a buy order is sent at the market price. This does not mean that you will buy at 0.94000. It is not a fact that there will be such a price on the market at that moment. Perhaps the price will immediately jump by 50 points and eventually the order will open at 0.94050 or even more. This situation is called slippage in Forex language. It all depends on the situation at a particular moment.

Slippage occurs most often if the order is at strong support and resistance levels, since there are many other larger orders at these prices.

Buy stop and sell stop orders are used in breakout strategies. Despite the high costs of the spread, these execution options can bring large profits if the trend continues.

Note If prices change during order execution, you will be offered new ones. This case is called requote .

Order “Stop / Limit” - stop with a limit

A “Stop / Limit” order is placed to control the price at which the “Stop” order is executed. In this type of order, two prices are used: the first price is specified for the “Stop” order and the second for the “Limit” order.

This type of order works as follows: when the market price reaches the “Stop” price marked in the order and becomes a “Market” order, it will only be executed if the price does not go beyond the “Limit” of the order. Stop/Limit orders are more often used to open positions than to close positions.

Take profit and stop loss orders

You can read more about take profit and stop loss orders in the article: take profit and stop loss

We will just briefly repeat:

Take profit is the price at which profit is recorded. In fact, “profit” may not always be positive. For example, if the price has gone negative, then you can place an order to sell a little more than the market, thereby trying to reduce the loss.

Stop loss is the price upon reaching which the order is closed at the market price. Stop loss may not always be negative.

Each order can have both Take Profit and Stop Loss. To which level the price reaches first, that order will be executed.

Take profit and stop loss are extremely important when trading, because thanks to them the position is closed without your participation.

Other orders

The technical capabilities of various online trading platforms can provide the ability to place orders such as:

Bracket Order - automatic placement of orders according to predetermined parameters.
Trailing Stop - automatic change in the price of a Stop order according to predetermined parameters.
Previously placed but not yet executed orders can be: O, or Replaced - “Cancel/Replace” - the placed order is replaced by a new order with changed parameters.