What is Pending Order, Stop Loss, Take Profit, and Trailing Stop in Forex Trading?
- August 1, 2021
- Posted by: Daniel Richard
- Category: Forex Trading
Some remarkable technical terms are so essential for forex trading. The accurate knowledge about these terms will help you to earn a vast profit. As a forex trader, you have to learn about pending orders, stop loss, take profit, and trailing stop.
If you have a proper idea about this method, you will make the right decision while trading. This article will be helpful for forex traders because they will get appropriate knowledge about these four terms.
What is a Pending Order in Forex?
Pending order is an easy and automatic trading method. The price value of the currency pair is changing every day and every moment. So, by this method, traders can easily set up an entry price. When the market price touches this particular price, the trade opens automatically.
If the marker price does not reach your particular set up price, nothing will happen. It is not possible to wait in front of the laptop to track change in the currency pair all the time; that’s why the trader uses the pending order instruction. There are four types of pending orders. Let’s discuss these.
- Buy Limit Pending Orders: Buy limit pending order means traders buy only below and the particular price. If you are sure that the price will increase, you can choose the buy limit.
- Sell Limit Orders: Traders sell only when the price has already increased.
- Sell Stop Orders: When the sell order is below the current particular price, traders stop selling the pending orders.
- Buy Stop Orders: Traders use the buy stop pending orders when the price has increased.
What is Stop Loss in Forex?
“Stop order” or “Stop market order” is also named as stop loss. The trader can not bear a massive amount of losses, so they set up a particular price from where if the market price reaches the specified price, the trade will automatically stop. You can easily control your loss by setting up a stop loss method.
For instance, suppose you open a trade at 1.3460, and you do not want to lose more than ten pips. For this reason, you set up a stop-loss price of 1.3450. When the price comes down to 1.3450, your trade will automatically stop. So, stop loss is an essential tool for traders to reduce their loss.
What is Take Profit in Forex?
Take profit method is the opposite of the stop loss. Traders set up a specified price (profitable price), which means if the price rises, it will reach this selected rate. After touching this particular price, the trade will automatically close. In the take-profit method, the trade closes after going up, but in stop-loss, trade stops after going down.
For example, think you invest 113.50 in a currency pair, and you want to take profit when it is 115.00. You have to set up the rate in your take profit level. When the market price reaches this particular rate, you will get your expected profit, and your trade will also close at the same time.
What is a Trailing Stop in Forex?
A trailing stop is a changeable stop loss tool. When you use a general stop-loss, it will fix at a particular price. Your trade does not close until the market price reaches that particular price. Suppose your buying price is 1.3000; you set your stop loss below 100 pips that means 1.2900 and set the take profit at 1.3200. Now, if your trading price reaches 1.3150 and also returns from 1.3150 to 1.2900, your trade will close, and you will lose 100 pips.
But if you use a trailing stop, you will never lose in trading. Suppose you use 100 pips as a trailing stop; your investment is 1.3000. When the price rises from 1.3000 to 1.3150 and starts to decrease from there, your trailing stop will also change its position. It will go up from 1.2900 to 1.3050 and close your trade because you fixed 100 pips trailing stop so that it will exclude from 1.3150. Finally, you will get 50 pips as your profit. If you use a trailing stop, there will be no possibility of loss.
Therefore, pending order, stop loss, take profit, and trailing stop is used automatically. You will be able to save time and also decrease your trading loss by using these four tools.