Probably the most common question we receive is when to use limit orders or stop orders against going direct to market.
Before going into this I wanted to give some context by talking about a EURCHF trade order we placed and the reasons why, citing an example of using a pending buy order.
EURCHF (why we placed this order)
We saw good cyclicity and a strong respect of the 20 Moving Average on the 1 hour time frame, showing us a third Higher Low (HL). All the moving averages are agreeing direction along with our Stochastic and RSI indicators. Our pending buy order is placed above the current double top with a stop loss placed below the 200 moving average.
Looking at the higher time frame correlation showed the 50 moving average acting as a trend line and looking at the Daily chart, price action is coming off support.
Our order was set at 1.1016 with a initial take profit set at 1.1040. As the trade progressed a number of our VIP members removed their take profit from a 1:1 rewards risk and looked for a longer term take profit level at the 200 moving average of 1.1130.
Above is an example of all the signs we look at when placing a trade.
Limit Order vs Stop Order
Placing different types of orders tells the broker how and when you want your positions to be taken.
You are saying not to buy at the current market price but only when the price moves in the direction you want or think it will go.
There are 4 types of orders:
- Buy Stop
- Sell Stop
- Buy Limit
- Sell Limit
With experience you will get used to knowing when to place different types of orders. If you are starting your trading journey do not be disappointed if when you set limit buy orders too low they are never filled and likewise for limit sell orders.
The more experience looking at charts you have, placing trades and studying price action the more familiar you will become with placing orders and most importantly at what price to set them.