Now that we know what goes into a trade, we need to also know how to enter the trade to a broker. There are two main types of orders to buy currency, the first of which is a market order, the second is a limit order.
A market order is an order at the current market ask price for a certain currency pair. This type of order is filled instantaneously at whatever price the broker can match up with your entry. Market orders are used by virtually every trader, but are more often used by traders that want to buy at a certain time (now) rather than a certain price.
A limit order is a special order put into a broker to buy a currency pair at a predetermined price. Let’s say that the current value of the GBP/USD pair is 1.4100 and you want to buy the pair, but at a price lower or higher than the current price. For the sake of discussion, we’ll say you’re interested in buying GBPUSD only at a price of $1.4025 and do not wish to buy it at the current price.
By entering a limit order, you are able to enter the price at which you’d like to buy ($1.4025) and how long you’re willing to wait for the order to be filled. If at any time the price falls to $1.4025, your broker will automatically enter the trade, choosing to buy X number of lots at this predetermined price.
Limit Orders Operations
Most brokers will not require you, or your platform, to be logged into your account to execute a limit order. This is both a benefit and a negative, as you’ll be able to log out of your account and still have your orders in place, but should you forget, you might find yourself holding a position that you forgot about(see also what is a pip). Holding positions unknowingly is dangerous, due to the fact that the market may move wildly without you to close the position either for a profit or loss.