Order types: market, limit and stop orders

An order is an instruction to the trading platform to buy or sell an instrument, such as a currency pair. Every order says what to trade, in which direction (buy or sell) and how much, measured in lots. It can also carry a stop loss and a take profit, which close the position later.

Orders come in two families:

• Market orders fill straight away, at the best price available at that moment.
• Pending orders wait until the price reaches a level you set, and only then fill.

Prices have two sides: you buy at the ask, the higher price, and sell at the bid, the lower price. The difference between them is the spread.

A market order asks for a fill now. You click Buy or Sell, and the platform fills the order at the best price available when it reaches the market. It is the simplest way to open or close a position, and the one most platforms show first.

The trade-off is price certainty. The price you see on screen is the last quote, and prices can move in the fraction of a second it takes to fill the order. The difference tends to be larger in fast markets, around major news, or when few prices are available. It is called slippage, and it can work against you or in your favour.

A pending order is an instruction to open a position later, at a price level you choose. When you submit it, the order is placed: it waits on the platform, and no position is open yet. If the price never reaches your level, nothing happens. Until it fills, you can usually move the level or cancel the order.

Limit orders: your price or better

A buy limit or sell limit fills at your price or a better one. The catch is that it may not fill at all: if the price stops just short of your level and turns away, the order stays unfilled.

Stop orders: triggered at a level, filled at the next price

A buy stop or sell stop becomes a market order once the price reaches your level. It is then filled at the next available price, which can be worse than the level when prices move quickly.

MT5 also offers stop-limit orders: once the stop price is reached, a limit order is placed at a second price you set.

No order type can promise a fill at an exact price. Most differences have one of two causes:

• Slippage: the price moves between the moment an order is triggered and the moment it is filled. NextTrade's Order Execution Policy applies slippage symmetrically, so both better and worse fills are passed on to you.
• Gaps: the price jumps from one level to another with no trading in between, for example when the market reopens after a weekend or after major news. A gap can skip straight past a pending order's level.

If a gap skips a stop order's level, the order fills at the first available price after the gap. A limit order fills only at its price or better, so a gap may give it a better price, or leave it unfilled.

The screens differ, but the steps are much the same on both platforms:

1. Choose the instrument and the order type: market, or pending (limit or stop).
2. For a pending order, set the price level.
3. Set the volume in lots and check the margin the trade needs.
4. Optionally, add a stop loss and a take profit (see Stop loss and take profit).
5. Check the details, then click Buy or Sell.

With one-click trading on, the order is sent without a confirmation window. It saves a step, but a stray click opens a position straight away, so use it with care.

The video above opens a trade on a TradeLocker demo account in about 90 seconds. In short:

1. Find the market you want to trade in the market list.
2. Choose the order type: market (at the current price) or pending (at a price you set, which you can drag on the chart).
3. Choose the number of lots; the margin for the trade is shown just above.
4. Set a stop loss and a take profit: you can enter your risk as a dollar amount.
5. Click Buy or Sell. One-click trading can skip this confirmation, but use it with care.
6. The order is placed. It is a pending order, so no position is open until it fills.

The video ends with a reminder that trading involves risk.

A few checks catch most order-entry mistakes:

• Direction: Buy opens a long position, Sell a short one.
• Level: check which side of the current price the level must be on for that order type before you confirm.
• Volume: 1 standard forex lot is 100,000 units of the base currency, so 0.1 lots and 1 lot are very different sizes.
• Market hours: nothing fills while the market is closed, and a pending order may fill at the reopening price.

None of these checks removes market risk; they only make sure the order you place is the one you meant.