Hi folks,
Today we are going to talk about one of hard understood issue in MetaTrader and Forex (at least for the new comers); Pending orders.
When you take your decision to enter the market and to sell/buy a currency pair you order you brokerage to make to sell/buy for you.
There are two types of orders you can make:
Instant (Market) order:
In this type of orders you order the brokerage to sell/buy the currency instantly and at the current price you see in the terminal. The broker executes your order without any delay and return OK for you.
In this type of orders you use the BID and ASK prices to sell/buy the currency.
In MetaTrader you make the instant order by going to Tools menu and choose New Order command or hitting F9 hotkey to open the Order window (Figure 1).
Figure 1 - Order window
As you see in figure 1 you have the current price of the currency written as ASK/BID pair (1.2100/1210) and when you click Sell or Buy buttons you sell/buy instantly at these prices.
Pending orders:
In this type of orders you order the brokerage to sell/buy the currency in the future and not now. You ask him to sell/buy the currency when the price of the currency reaches a specified price above or below the current price.
Example: the current Ask price of the EURUSD pair is 1.2100 and going up, and you guess the price will go down a little before continuing to go up, in this case you can order the brokerage to Sell the EURUSD when the price at the 1.250.
The brokerage will obey your order and wait the price of the EURUSD to reach 1.250. If your prediction was right and the price went reached 1.250 the brokerage will Buy the EURUSD at the price 1.250 and convert your pending order into market order.
If the price didn't reach the 1.250 what will happen? The brokerage can wait for ever so you can set an expiration time to your order that if has been reached the brokerage cancel the order.
The type of the pending order explained in the example above called Buy Limit order; there are four types of pending orders.
Buy Limit order:
In this type of pending orders you want to Buy a currency pair and you guess that the price will go down for a few period of time and then will go up again. You set the price level below the current Ask price and send the order to the brokerage.
When the price goes down to the level you have specified the order will be opened for you and the brokerage buys the currency pair.
Buy Stop order:
In this type of pending orders you want to Buy a currency pair and you guess that the price will keep going up but you are not sure, you set the price level above the current Ask price and send the order to the brokerage.
When the price goes up to the level you have specified the order will be opened for you and the brokerage buys the currency pair.
Sell Limit order:
In this type of pending orders you want to Sell a currency pair and you guess that the price will go up for a few period of time and then will go down again. You set the price level above the current Bid price and send the order to the brokerage.
When the price goes up to the level you have specified the order will be opened for you and the brokerage sells the currency pair.
Sell Stop order:
In this type of pending orders you want to Sell a currency pair and you guess that the price will keep going down but you are not sure, you set the price level below the current Bid price and send the order to the brokerage.
When the price goes down to the level you have specified the order will be opened for you and the brokerage sells the currency pair.
