What is a pending order?
A pending order is a tool that allows you to open or close positions at the desired price automatically after the price reaches the set value. This is the main difference from a market order, which is executed at the current price immediately. At the same time, pending orders differ in that if the price has not reached the set value, the order will not be executed.
Pending orders will help those who use technical analysis and do not want to constantly sit on the screen, waiting for the best entry price.
With the help of pending orders, you can not only open, but also close positions.
Stop Loss is an order that is placed in case the price does not wow where the merchant waited. When the price reaches this order, the position will be closed at a loss.
Take Profit is an order that will automatically close a profitable position when the trader’s predicted price level is reached.
Opening positions with limit orders
A limit order is an order to open a position at the indicated price or better. To make a purchase transaction, an order is placed below the current market price, and for sale – higher. Therefore, limit orders are applied when the trader waits for the price to reach a certain level and then moves away from it in the opposite direction.
Such orders are used in situations where a trader expects a price rebound from strong levels. They are executed at a price no worse than indicated. Execution is possible even at the best price if the value specified in the order falls within the price gap.
purchase limit
Buy limit is a pending order to buy (at the ask price) below the current market price. This order is used by a trader when he expects the price to decline to a certain value and wants to open a buy position there. For example, if the price of the currency pair GBP/USD is at 1.3880 and the trader wants to buy it from the 1.3800 level, they should set a Buy Limit order at this level (or maybe a bit higher).
sell limit
The sell limit is a pending sell order (at the bid price) above the current market price. This order is applied if the trader expects the quotes to rise to a certain level and is going to open a short position there. For example, if the currency pair quotes EUR/USD they are now around 1.1750, and the trader wants to sell the asset when the price reaches the 1.1800 level, a Sell Limit order is placed at this level (or slightly lower).
Opening a position on a stop order
A stop order is a tool that allows you to open a position at the market price when the values specified in advance in the order are reached. A buy order is placed above the current price and a sell order is placed below it. Stop orders are used when a trader expects the price, having reached a certain level, to continue moving in the same direction.
Typically, these types of orders are used in strategies based on breakout levels.
If there is momentum in the market at the moment due to high volatility, there may be a slippage and the order will open slightly worse than the trader’s stated value.
buy stop
Buy Stop is an order to buy (at the Ask price) above the current market price. Triggering an order and opening a buy position is triggered when the price rises to the specified value.
Example:
The quotes of the pair AUD/CAD they are at 0.8940.
The trader expects the growth to continue if the price breaks the resistance level of 0.8975.
To do this, a pending Buy Stop order is placed just above this level (for example, at 0.8990).
When the price reaches 0.7160, a buy position is open.
sale stop
Sell Stop is an order to sell (at the bid price) below the current market price. When the price reaches the desired values, the order is automatically activated and opens a sell position.
Example:
The quotes of the pair GBP/JPY they are around 160.60.
The trader expects the pair to continue to decline if it breaks the 160 support level.
To do this, a pending Sell Stop order is placed slightly below this level (for example, at 159.85).
When the bid price reaches the value of 159.85, a sell position will be opened.
Conclusion
Thanks to pending orders, the trader has another powerful tool that helps to use various strategies profitably, which helps to increase the number of openings or closings of positions.
It is possible not to monitor the market 24 hours a day, but to place orders in a planned place, with fixed risks. The trade turns almost fully automatic.