A pending order is placed on Forex to open a position. It is an application for the purchase or sale of currency at the moment the pair reaches a certain rate.
Grid of pending orders and their types
Four varieties of pending orders are known:
- Buy limit. Currency is bought when the value becomes equal to the specified value. Moreover, the current price is usually higher in the prescribed manner. Orders of this type are set up, based on the assumption that, having decreased to a given level, it will stop falling and begin to increase. At the same time, it is not possible to set an order limit above the current demand price - you must use stop commands for this.
- Buy stop performed when the value becomes equal to the specified value. At the same time, the current price level is less than the value of the established order. Usually, orders of this type are placed based on the assumption that the price of the instrument will overcome a certain level and continue to grow. It is not possible to set a buy stop below the current bid price; you must use limit orders for this. For example, the current price of EUR / USD is 1.0495, and you want to make a purchase when it becomes higher and reaches 1.0515. To do this, you must set the Buy Stop order at 1.0515.
- Sell limit performed when the value becomes equal to the specified value. The current price level is less than the set order parameter. As a rule, such orders are placed on the assumption that the cost, having reached a certain level, will stop its growth and begin to decline. It is impossible to sell currency at these limit orders below the current price, for this you must use stop commands.
- Sell stop. A currency is sold when the price becomes equal to a given value. The current price level is higher than the value of the order that has been set. Typically, this type is exposed on the assumption that the price of the instrument, having dropped to a given level, will continue to decline. It is not possible to set a sell stop above the current price; you must use a limit sell order in this case. For example, the price of EUR / USD at the moment is 1.0495, and you want to sell the currency when the price goes down and reaches 1.0480. Therefore, you must place the order at 1.0480.
To place a pending order, you must click on the window of the new order, change its type and configure its immediate execution.
How it's done?
Immediately after you select the parameters of a pending order, certain fields will be displayed. The most famous adviser of pending orders is Meta Trader 4. When configuring it, you need to specify the order in which the conditions are met: currency pair, volume and level of the position to be opened, type of order, Stop Loss and Take Profit and, if necessary, your comment on the order and the expiration period after which the order will be deleted automatically.
How to set buy limit and buy stop?
In MT4, you can press F9, and the corresponding menu will open in the application window. In the "Type" field, replace "Immediate Execution" with "Pending Order". In the second field with the same name, which is below the first, make the appropriate selection. If you want to buy a currency when the price goes higher and reaches a higher level than now, you must select the “Buy Limit”.
If you want to buy when the price drops below and reaches a lower level than now, you must select the “Buy Limit”. You can select other parameters, such as volume (the amount of the lot size that you want to take), Stop loss and target orders.If you have not set Stop Loss and target levels, you can place them later after placing a pending order. However, the main parameters can no longer be changed, you will have to close pending orders and set new parameters again.
Enter data in the Price Limits field. Now you can click on the "Place" button, as a result a pending order will be placed. If you decided to place the Stop command, and entered a price lower than the current market price in the Price field, you will receive an error message when you click the Place button. This will happen due to the wrong choice of trading data.
The difference between Sell Stop and Sell Limit
If you place a pending sell order above the market price, it will be recognized as a “Sell Limit”. For example, in EUR / USD the current price is 1.0495, and you want to complete the transaction when it goes up and reaches 1.0515. Therefore, it is necessary to set a limit for a sell order in the amount of 1.0515.
If you place a pending sell order below the market price, it will be a sell stop. For example, in the EUR / USD pair, the current price is 1.0495, and you want to make a sale if the price goes lower and reaches 1.0480. Therefore, you need to set a Stop order to sell at a value of 1.0480.
How to set Sell stop and Sell limit?
This happens in the same way as setting a buy stop and buy limit. You press F9 and repeat all the steps that were described above. The only difference is that you need to choose a limit at which you want to sell the currency when the price reaches a higher level. In turn, a buy stop is placed if you need to sell when the price reaches a lower level.
What is the advantage?
A pending order is a potential trade that will only trigger when a certain level set by the trader changes. Instead of following the indications on the screen and waiting for the desired price level to be reached, you can use a pending order. This is exactly the trading method that will automatically work as soon as the price level that you have chosen is presented.
The strategy of “pending orders” may depend on the direction of the market. So, you can use this strategy when the market moves up / down or insignificant fluctuations (using a customized stop order). If you have reliably determined that the direction of the market is moving up, you must set up a pending Buy Stop order. In order to do this, you will need to set the entry price, Stop loss, target profit and position size.
What does it matter?
Check out current financial news. You must be sure that when the installation of pending orders is done, you have studied all the possible news that may come out in the near future and affect your trading. A good source for analyzing upcoming events for the day and week ahead are economic calendars compiled by specialists. Some events can cause market volatility and significantly increase or unexpectedly change the direction of trade. If you have already entered the trade, you should close it a few minutes before the news, which will help you significantly reduce the risk.
Set the entry price based on the latest data. Find the last fractal at the top of the chart, set a high price just below it. This is the cost line at which you will enter the market and, therefore, the entry price with which you enter your pending order. When the price rises to this level, it will automatically enter the trade. Find the last fractal below and place a mark on it - this will be your Stop Loss. Enter your profit target using the reference point. Find the nearest pivot points on your chart - this is Take Profit. The green line will show the price at which you will enter your target profit.
Placing a pending order during a trading day
However, it should be noted that if the profit target is less than 5 pips, you need to pay attention to the following upward movement of indicators. This ensures that you include distribution in your goal, you will bear a reasonable risk in order to increase the ratio.
At midnight, pivot points undergo changes. The new trading day will be a new set of reference points based on data from the previous day. In this case, you will have to adjust your profit target.
Rounding numbers
Enter the volume of trade, which depends on the limit of your account. For every $ 100 you have on your trading account, you should trade a rounded lot up to 0.01 (based on trading in major pairs with the US dollar as currency quotes).
Never leave open positions for the weekend. If you still have an open order on Friday at 18:00 Moscow time, close the position. For example, if there is $ 450 in the account, you will trade with a volume of 0.045, which you will need to round to 0.04.
If the account is denominated in a currency other than the US dollar, you just need to calculate the equivalent dollar amount in your account using the current exchange rate and the base position size.
Quick setup
Pending orders on Forex can be set up instantly using trading charts. If you want to enter the market when the price is higher than it is now, you need to press the right button above the current market price on the chart. Then, if you want to buy a currency when the price reaches this level, you must click on “Stop”. Accordingly, if you want to sell when the price reaches this level, then you need to configure the Buy limit.
Similarly, if you want to enter the market when the price is below its current level, you need to click the right button below the current market price on the chart. Then, if you want to make a purchase when the cost is at this level, you must click on “Sell Limit”. And if you want to sell the currency when the price is in this value, you need to click on “Stop”.
You do not have to enter all the data if you follow this method (right-clicking on the price chart). As soon as you make such settings, a pending order will be placed and a red dotted line will appear on the chart. You can easily right-click on the desired part of the graph. However, you can drag the line to a higher or lower level, as well as modify a pending order.
Some features
You can also use the MetaTrader terminal for advanced settings (press Ctrl + T for this). Right-click on the entry for the pending order in the "Trade" tab, and then click "Modify or delete the order." Then you can change the settings, as well as enter Stop loss and target levels. The only thing that cannot be changed after placing a pending order is the volume of trade. As already noted, for this it is necessary to completely repeat all the settings made.
