Just like the stock market, you cannot do anything in the forex market without giving orders. There are some major order types which are very commonly used:
Buy : A buy order will sell the quote currency and buy the base currency at the ask rate. Buying is also called “going long”. When you buy a currency pair, you want the exchange rate to go up to sell it on a higher rate and profit.
Sell : A sell order will sell the base currency and buy the quote currency at the bid rate. A sell order is usually used to close a long position (a buying position).
Short Sell : Short selling means selling something you do not have, and obligating to buy it back. For example, if your trading account is funded with US dollars but you think the EUR/USD rate will go down, then you want to sell it. However, you cannot sell Euros because your account is funded with US dollars. In this case, a sell order will sell this pair short (also called “going short”). When you short sell, you want the exchange rate to go down, so you can buy it back at a profit (you do the well known phrase “buy low, sell high”, but backwards).
Short Cover : Short covering means closing a short position. The actual order is a buying order, and it buys back what you obliged to buy.
Limit : A limit order is a future order that will be done only if a certain condition occurs. If it’s a buy limit, the order will be carried only if the exchange rate is at the limit or lower. If it’s a sell limit, the order will be carried only if the exchange rate is at the limit or higher.
Stop Loss : A stop loss order is placed in order to limit the potential loss of a trade. The stop loss order is executed when the exchange rate crosses a certain pre-set rate. If the position is long, the stop loss order will be executed when
the exchange rate goes below a pre-set rate. If the position is short, the stop loss order will be executed when the exchange rate goes above a pre-set rate.
Take Profit : This is a type of limit order. It is used to take a profit at a certain point,so it will not be lost in case the market changes its direction
Buy : A buy order will sell the quote currency and buy the base currency at the ask rate. Buying is also called “going long”. When you buy a currency pair, you want the exchange rate to go up to sell it on a higher rate and profit.
Sell : A sell order will sell the base currency and buy the quote currency at the bid rate. A sell order is usually used to close a long position (a buying position).
Short Sell : Short selling means selling something you do not have, and obligating to buy it back. For example, if your trading account is funded with US dollars but you think the EUR/USD rate will go down, then you want to sell it. However, you cannot sell Euros because your account is funded with US dollars. In this case, a sell order will sell this pair short (also called “going short”). When you short sell, you want the exchange rate to go down, so you can buy it back at a profit (you do the well known phrase “buy low, sell high”, but backwards).
Short Cover : Short covering means closing a short position. The actual order is a buying order, and it buys back what you obliged to buy.
Limit : A limit order is a future order that will be done only if a certain condition occurs. If it’s a buy limit, the order will be carried only if the exchange rate is at the limit or lower. If it’s a sell limit, the order will be carried only if the exchange rate is at the limit or higher.
Stop Loss : A stop loss order is placed in order to limit the potential loss of a trade. The stop loss order is executed when the exchange rate crosses a certain pre-set rate. If the position is long, the stop loss order will be executed when
the exchange rate goes below a pre-set rate. If the position is short, the stop loss order will be executed when the exchange rate goes above a pre-set rate.
Take Profit : This is a type of limit order. It is used to take a profit at a certain point,so it will not be lost in case the market changes its direction
I just started with the Forex market, and this tutorial is very important to beginner.
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