Commands for opening positions in trading

1. What is an order?
2. Market orders
3. Entry orders
4. Order validity

In trading, you open and close positions using orders.

What is an order?

A command is an instruction to execute a trade. It is used to notify your broker or trading provider when you want to open or close positions. There are various types of orders, and understanding how they work is crucial for a better understanding of the markets.

In the past, investors placed orders with brokers over the phone, but with the rise of online trading, most traders now use online trading platforms.

If you have used a demo account for buying and selling as part of Trading Academy, you have placed orders.

Let’s look at the basic types of orders used in everyday trading, starting with the simplest type: market orders.

Market order

A market order is an instruction to execute a trade immediately at the best available price at the time. If the EUR/USD is at the level of 1.0745/1.0746, using a market order means that your trade will be executed as close as possible to this price.

Market orders can be used to open or close a position.

Entry orders

What if you don’t want to trade at the current market price? For example, you might think that buying EUR/USD is a great opportunity – but only if it drops to 1.0699. You could watch the EUR/USD and open a market order when it reaches that level, or you could use an entry order.

Entry orders automatically open a position when the market reaches the level you have set.

This is especially useful for traders who want to buy/sell at a specific price and do not have time to constantly monitor the markets until this level is reached.

There are four types of entry orders: buy stops, buy limits, sell stops, and sell limits.

Buy

• Buy stops: This instructs your broker to open a long position when the market reaches a price above the current price.

• Buy limits: This instructs your broker to open a long position when the market reaches a price below the current price.

Sell

• Sell stops: This instructs your broker to open a short position when the market reaches a price below the current price.

• Sell limits: This instructs your broker to open a short position when the market reaches a price above the current price.

Stops vs. Limits

In orders, you will often hear the terms "stop" and "limit."

• Stop means an instruction to execute the trade at a price worse than the current price.

• Limit means an instruction to execute the trade at a price more favorable than the current price.

However, "worse" or "favorable" does not necessarily mean "lower" or "higher." For example, with a buy limit, the favorable price is below the current price (the lower, the better), but with a sell limit, the favorable price is above the current price.

Good until when?

In addition to deciding the direction of the trade, the quantity, and the level, you have the option to determine how long your entry order will remain active until it is canceled by your provider. On the FOREX.com platform, there are three options: Good 'til Canceled (GTC), Good 'til End of Day (GTD), and Good 'til Time (GTT).

Good 'til canceled (GTC)

If you choose this option, your entry order will remain active until you manually cancel it, the market expires, or it triggers. This could mean that the order remains active for weeks or months after it is first placed.

Good 'til end of day (GTD)

Orders with this option are automatically canceled at the end of the trading day. This is useful if you think the opportunity you selected won’t last. With GTD, you don’t need to worry about forgetting to cancel your order and ending up with an unwanted trade.

Good 'til time (GTT)

This type of order provides maximum flexibility by allowing you to choose the exact time and date that you want your order to remain active. If the market reaches the level you have set within this timeframe, your order will trigger. If not, the order will be canceled.