Since there is a need for automation in the Forex markets, it becomes necessary to understand the various types of orders available to the Forex traders. Types of Forex orders are generally divided into two major categories- Market order and Limit order.
A market order is an instruction given by a trader, instructing his broker to buy or sell once his trade reaches a certain rate. The forex brokers execute all market orders immediately at current prices, which may be higher or lower than your expected rates. You should use this type only when needed, as there can be no certainty about the exact execution price most of the time. For example, if your currency pair trades upward after purchasing it at 19800 units per dollar, your market order will be sold at the rate of 19800.
This type of Forex order is beneficial as it lets you buy or sell once a certain limit price has been reached. The main difference between market and limit orders lies in the value of the trade obtained. With a limit order, you are guaranteed to get a better execution price than the present one, even if it takes quite some time for your currency pair to reach that price.
On the other hand, there can be no certainty about what rate you will receive with a market order unless the currency pair reaches your threshold level within seconds after placing an order. Therefore, you should use this type of Forex order when trading illiquid currencies with no margin for mistakes. A 'buy limit order is an instruction to buy only if the rate falls to or below a certain value, while a 'sell' limit order is an instruction to sell the currency pair once it rises above a certain value.
This is the most common form of Forex orders. The first part of a pending order instructs your broker to place an order, and the second portion lets you specify what type of order you want, whether it be "buy," "sell," or stop. For example, if you are long on AUD/USD and wish to wait for a better price before selling it off at 1.013550, you can place an immediate sell limit at 1.013505 with a trader's margin account balance of $100 thousand million.
Profit Booking Order
This type of Forex order is used when you want to sell your currency pair once it reaches a certain price. Profit booking orders are generally used by traders who believe that their new information or knowledge about Forex will increase their profit.
Trailing Stop Order
That's one of my favorite Forex trading strategies, and I have been using it quite often in various Forex trades. A trailing stop-start order allows you to buy or sell at whatever rate specified if the market changes in your favor during the trade. The margin account balance should be sufficient enough to permit execution on unfavorable conditions. If the currency pair moves in your favor, this type of order can save considerable losses, which would have occurred with a fixed stop loss.