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Trade. Order, transaction, position. Types of orders

Main trading stages. Various kinds of orders. Example of work on a transaction

Trading process in the Forex market can be divided into two stages: "Waiting" and "Trade". These steps are permanently alternate. You cannot always trade (at least because in every strategy there are times when it makes sense to enter the market, and sometimes it is better to be out of the market). However, you do not have to waste your time during "Waiting". Usually, during "Waiting" a trader analyzes the market (see. Sections II and III of this course), keeps records and analyzes the past transactions (correction of errors).

Here we will have a closer look at the trading process and describe the life stages of any operation. So, a full operation of purchase and sale of a foreign exchange contract (sometimes called “a round turn") consists of the following stages:

  • placing of an order by a trader (electronic trading system of a brokerage company sends an order to perform a certain action; types of orders will be described below);
  • execution of an order by a brokerage company (as a result of order execution - provided that the order is submitted correctly and can be executed in the current market conditions – a transaction is made);
  • one or several transactions (referred to as open transactions or open orders) make the client's position in the market;
  • position has the so-called "floating" result, which is reflected in the account parameter called "equity";
  • as long as the order is opened, the trader can modify it in a certain way;
  • the transaction is closed by one or another order, the closing operation is always the opposite of the opening operation;
  • as a result of closing the transaction, its financial results are reflected on the balance sheet, and the record goes into history (statement), where it is converted into a closed order.

The described operation lifespan is a kind of an "ideal" variant, which we provide as an example. In fact, it should be considered that not every placed order leads to the opening of the transaction. Order execution also has certain features. In addition, the closing of a transaction may occur as a result of a situation when the amount of free funds on the account is not sufficient to maintain the position (margin call or stop-out) and not as a result of execution of an order by a broker, when the order was submitted by a trader. In this course, however, we have no possibility to cover all the details. This is the task of the company’s specialized courses.

There are several types of market orders.

  • Market order — trader’s order to a broker to make a transaction at the current market price. There are the following subtypes:
    • marketbuy — open a transaction for purchase at the current ask price;
    • marketsell — open a transaction for purchase at the current bid price;
    • marketclose — close a transaction at the current market price (transactions for purchase are closed by selling at the bid price, transactions for selling are closed by purchasing at the ask price).
  • Gtc (Pending order) - order to a broker to make a transaction under certain conditions. There are following types of pending orders:
    • buystop — open a transaction for purchase provided that the price overcomes a level predefined in the order when moving from bottom to top (to purchase in the trend);
    • buylimit — open a transaction for purchase provided that the price reaches a certain level when moving from top to bottom (to buy on a pullback);
    • sellstop — open a transaction for sale provided that the price overcomes a certain level when moving from top to bottom (to sell in the trend);
    • o selllimit — open a transaction for sale provided that the price reaches a certain level when moving from bottom to top (to sell on a pullback).
  • Stoploss (in fact, it is a pending order but it does not exist apart from the "main" position order) – an order to a broker to close a position at a certain level of losses (to cut losses). For the position for purchase, stoploss can be located only below the current price; for the position for sale, stoploss can be located only above the current price. If there is a floating profit for the position, the stoploss order can be set in the losses area or at the opening level (this will lead to the fact that such a transaction will definitely not become unprofitable) and in the profits area (this will close the position if the floating profit begins to decline);
  • Takeprofit (in fact, it is a pending order but it does not exist apart from the "main" position order) – an order to a broker to close a position at a certain level of profit. This order allows fixing the floating profit on the position by showing it on the balance sheet. For positions for purchase, takeprofit may be located only above the current price; for position for sale - only below the current price. If the current result on the position is loss-making, takeprofit can be set either in the losses area (this will close the transaction as soon as the profit decreases at least slightly) or at the opening level (this will bring the transaction to breakeven).

It is recommended to read the relevant provisions of the trading regulations by your broker to find out more about the types of orders, as well as about the peculiarities (terms) of their execution.