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When trading forex (or other financial instruments), it is crucial to understand the various order types available to execute trades. These order types provide you with the flexibility and control needed to execute your trading strategies effectively. In this lesson, let’s review the most common order types you learned from the previous lesson, their functionality, and the advantages and disadvantages of…

The basic forex order types (market, limit entry, stop entry, stop loss, and trailing stop) are usually all that most traders ever need. To open a position, the following pending orders may be used: Here’s a cheat sheet (current price is the blue dot): Unless you are a veteran trader (don’t worry, with practice and time you…

Can I order a grande extra hot soy with extra foam, extra hot split quad shot with a half squirt of sugar-free white chocolate and a half squirt of sugar-free cinnamon, a half packet of Splenda and put that in a Venti cup and fill up the “room” with extra whipped cream with caramel and…

New traders often confuse limit orders with stop orders because both specify a price. Both types of orders allow traders to tell their brokers at what price they’re willing to trade in the future. The difference lies in the purpose of the specified price.A stop order activates an order when the market price reaches or passes a specified…

There are some basic order types that all brokers provide and some others that sound weird. Orders fall into two buckets: Here’s a quick “map” of the different types of orders within each bucket. Market Orders Pending Orders BuySell Buy LimitBuy StopSell LimitSell Stop Market Order A market order is an order to buy or…

Leverage is the ratio of the amount capital used in a transaction to the required security deposit ( the “margin“). It is the ability to control large dollar amounts of a financial instrument with a relatively small amount of capital. Leverage varies dramatically with different brokers, ranging from 2:1 to 500:1. Now that you’ve impressed…

When you open a new margin account with a forex broker, you must deposit a minimum amount with that broker.This minimum varies from broker to broker and can be as low as $100 to as high as $100,000. Each time you execute a new trade, a certain percentage of the account balance in the margin…

A cross-currency is any currency pair in which neither currency is the U.S. dollar. These pairs exhibit erratic price behavior since the trader has, in effect, initiated two USD trades. For example, initiating a long (buy) EUR/GBP is equivalent to buying a EUR/USD currency pair and selling GBP/USD. Cross-currency pairs frequently carry a higher transaction cost.

The critical characteristic of the bid/ask spread is that it is also the transaction cost for a round-turn trade. Round-turn means a buy (or sell) trade and an offsetting sell (or buy) trade of the same size in the same currency pair. For example, in the case of the EUR/USD rate of 1.2812/15, the transaction cost…

Exchange rates in the forex market are expressed using the following format: Base currency / Quote currency = Bid / Ask