How to Place Limit Orders and Stop Orders in Forex

Sometimes you get confused whether to place a  limit order or a stop order in a certain position but believe me it’s not that difficult if you know the basics.

BUY LIMIT vs BUY STOP:

If you are expecting a reversal or a retracement then placing a limit order is the correct idea. This usually happens at support and resistance levels, markets usually retraces at some point to these levels before heading back to the original trend. If you want to go long on a certain pair and you think that it will retrace somewhat before heading to new highs due to a certain existing support or resistance then you can place your buy limit there. You hope that you can jump in the train in a cheaper price. This way your chance of gaining good profits gets higher. Buy Limit Order is placed below the current market price But if the market is going in just one direction and you see a level after which market will definitely go up without any hurdle in between unless something unusual happens then you place your buy stop there. A Buy Stop Order is placed above the current market price.

SELL LIMIT vs SELL STOP:

If you want to go short on a certain pair and you think that it will retrace somewhat before heading to new lows because of a certain existing support or resistance then you can place your sell limit there. You hope that you can jump in the train at a good higher price. This way your chance of gaining good profits gets higher. Sell Limit Order is placed above the current market price But if the market is going in just one direction and you see a level after which market will definitely go down without any hurdle in between unless something unusual happens then you place your sell stop there. A Sell Stop Order is placed below the current market price. Below you will find a real example of USDJPY pair. It has been ranging for quite a months thus giving you opportunities for putting orders of sell limits and buy limits but what if it break the range? And which it did recently so there is where your stop orders come into play . By keeping them above and below the range you can always have a good chance to enter a trending trade.

Learning FX

The idea is to basically help out others trade and understand the foreign exchange market with more ease. My articles and trade ideas are based on my experience and are for educational purposes only. You can follow our updates on twitter

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1 Response

  1. Gina Spencer says:

    Very clear explanation.

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