When you register with a broker, you entrust him to execute your trades in the currency market on your behalf. However, in order to place a trading order, you should set trading parameters of your order in your terminal. When for example, you place an order to buy an asset (currency), you do with the target to sell it later at a higher price (if exchange rate goes up). If upward forecast happens to be faulty, you will try to sell an asset at the best possible price. A trade - is the result of your order either to open or close a trade.
Types of orders
Based on the time of order’s execution we can subdivide two types of trading orders: instant execution and pending orders.
- Orders of instant execution
This type of orders is executed by a broker instantly. Ideally, there should not be any delay between the moment of placing an order and its execution. In fact, not all brokers are able to execute an order without a re-quote or slippage in the periods of high volatility caused by the release of statistics or news.
- Pending orders
Pending orders are placed for execution at a certain time in future. You should set trading parameters in advance, enabling a broker to execute your order in a due time.
Parameters of placing a trading order, take-profit and stop-loss
You should not only set trading parameters of your trading order, but also choose a currency pair for trading, indicate a number of lots and two prices of your order Take profit and Stop-loss.
- Take profit
If the price of the currency pair selected by you goes up, you should specify the price level at which your trade shall be closed. Parameters of the order shall include closing price in case of the rise in currency. When the price reaches specified value, your position will be closed automatically and you will receive your profit.
It happens sometimes that after you have placed a buy order, the price can go down, instead of going up. That is why you should place a stop-loss, which is a price at which your transaction will be closed with the least losses.
Sell or Buy?
When you take a decision to open a position you usually have a rough idea of future developments in the market, which can affect the currency pair. After you specified and set parameters of your trading order, you can click a Sell or Buy button. You place Sell orders when you expect the decline in price of the financial instrument selected by you. You place a Buy order when you expect the rise in price.
Main factors effecting successful trading
- Trading experience
It is clear that experience comes with practice. You need to train and gain trading skills in order to improve your trading strategy. You will develop your skills only if you continue to practice.
- Emotional stability
The key enemy of a trader is his/her emotions, which interferes with making correct trading decisions. Trading in the currency market can be successful only if a trader can keep control of his/her emotions and develop emotional stability. Bear in mind that all your trading decisions shall be governed by your trading strategy but not your emotions.
- Right choice of a financial instrument
You should know as much as possible about the pair you are going to use in trading. Each pair is affected by political events, economic aspects and other factors. It is advisable to start trading with the most popular financial instruments.
- Best time for trading
You should decide what time-frames you will use for trading. Depending on the financial instrument you should determine what the best time for trading is. We recommend you to base your decision on the time of work of the global trading sessions and the release of the important fundamental data.
- Indicators and advisors
Always use several indicators of technical analysis. Additional indicators are used in order to receive confirmation of the signals given by the main indicator selected by a trader.
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.