Order types

There are numerous and different types of orders for buying or selling an underlying. While a market order is always executed at the current or next available price, there are others, called pending orders, which only become active once the price has reached a certain level.


Market Order

A market order is the most common type of order. The order is executed either at the current price offered or at the next available price. Important: not every price is offered by the broker or liquidity provider, so there are minimal price gaps. These gaps can also occur if the market is illiquid or if it is a fast-moving market situation, for example the publication of US labour market figures or key interest rates. If the market order is executed at the next available price, this is called slippage. There are positive and negative slippages that your broker will pass on to you.


Spread

A buy order is executed at the ask price and a sell order at the bid price. The so-called spread lies between the price of a buy order (Ask price) and a sell order (Bid price). This spread is only `paid` when a position is opened and is the reason why every trade is always negative in the first second. This is because the trading platform directly takes into account the price at which the position is closed again.

 


Buy Stop

This type of pending order is chosen when prices are expected to rise. The buy stop order is above the current price level. However, it is only executed when a certain price level has been reached on the market. One hopes for a movement towards further rising prices.

   


Sell Stop

This type of pending order is selected when a falling order is assumed. The sell order is below the current price level. However, it is only executed when a certain price level has been reached on the market. One hopes for a movement towards further falling prices.

   

 


Buy Limit

This type of pending order is chosen when speculating on a price reversal in a downward movement. The buy limit order is below the current price level. Trades of this type are placed with the expectation that the price will fall to a certain level and rise again.

 

 


Sell Limit

This type of pending order is chosen when speculating on a price reversal in an upward movement. The sell limit order is above the current price level. Trades of this type are placed with the expectation that the price rises and falls to a certain level.

 

 

 


Stop Loss

A stop loss order is used to limit losses if the market goes against expectations. Setting a stop loss order automatically closes open positions when the specified price level, which is set in advance, is reached. In a longterm movement, it is advisable to keep tracking the price level of the stop loss order in order to keep at least a portion of your profits in case of a trend reversal. In order to identify such meaningful marks, stop losses are set to a previous low or high, or using indicators such as ATR.

   

 


Trailing Stop

A trailing stop is an automatic stop loss order that can be set to a defined distance outside the current market price. A trader places a trailing stop for a long position below the current market price; for a short position they place it above the current price. A trailing stop is designed to protect profits and allow trades to continue if there are only small price reversals. In the case of larger resets, i.e. where the trailing stop has been set, it closes the trade. A trailing stop is a “trailing stop loss”, so to speak.

 


Take Profit

Take Profit means “profit taking”. A Take Profit order secures your profits. A stop order is placed in the direction of the expected market trend. This means that a buy order is placed above the current price and a sell order below it. When the price reaches the level, the position is automatically closed.

 

 

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