The transactions carried out by brokers for their clients, obey orders (orders). The simplest stock order is a Market Order). This is an order to buy or sell at the current price ("market price"). When buying this order means immediate announced by the sellers price (Ask)in the sale - near bid to buy (Bid).
Let's Digress for a moment orders and clarify the following: we already know that in each moment of time on the market, there are two price - Bid price and offer (Ask).
"A Trader sells potatoes on the market, is easy to learn-your-money - he has two rates - one to buy, the other on the sale." ( of jokes about the traders).
How can you not get confused? At what price to place a? How to calculate profit and loss? Fortunately, everything is simple. First, you should remember one principle - the transaction is always less profitable for the trader price. That is, if a trader buys, always at a higher price, Ask price, if you sell at the Bid price. The same rule applies if pending orders. Buy order (regardless of the order type) performed at the most high price Ask price and the order of the sales price Bid. Secondly, the trader no need to especially think about it - modern trading terminals execute it automatically.
Now, the market (market) order. It is obvious that the usage of such order opens wide possibilities of manipulation for a broker. A simple analogy - You want to exchange 100 dollars into rubles, but are forced to do so through an intermediary (broker). Then the market order will sound something like: "buy rubles for 100 dollars for the price, what will be". In this case You are fully rely on the broker's honesty. The simplest scheme which may be performed by a broker is to execute Your order at the maximum price, and counter transaction at minimum, putting the difference in his pocket. You don't notice it. That is why experts recommend not to use a market order under any circumstances. He (market order) is widely used on the stock markets and futures, Forex is used very rarely. Is used instead of a modified variant, the "request for quotation".
Quote Request is used to open a position, although it is not the only way. The trader tells a broker currencies in which he requests a quotation, and lot size it intends to conduct a transaction. All this is necessary for one reason, I spoke about in the previous article - discrepancy of price information and brokerage. The broker, in response, reports a pair of Bid and Ask prices. Price a broker can not instantly, because he needs to check if the trader to work with such a lot, contact its market - maker and request a quote from him, wait for response and then to inform the price the trader. On average, it takes from several seconds up to half a minute. If more is better not to work with a broker or use other orders. After receiving a reply to the request (by the way, when the price changes dramatically, the market is unstable, the broker may not a quote), a trader should choose "buy", "sell" or "nothing" (which means that it refuses to open a position). When you give the trader the words "sell" or "buy" the deal is completed, the broker confirms it with the message that bought so much for so much for this price. All negotiations recorded by the broker. Somewhat simplified procedure when we work through the trading terminal via the Internet, but the essence remains the same. In principle, the trader can many times to request a quote and abandon the deal, waiting for a better price, but some brokers limit this right (otherwise broker gets overloaded and other traders can not get through).
"Request for quotation" - the basic and most widely used order for position opening, but not the only one. Consider the other trader's instruments.
"Limit order", or "limit order" (not quite the right term, but established). Provides an indication of the broker to buy at or below a specified price or sell at a specified price or higher.
Many novice traders make the following mistake: they consider the formulation of order relative to the price of position opening. It's just carelessness. Always necessary to consider the formulation of order relative to the current rates. 't understand? Now let me explain with an example. Limit order is always placed AT a competitive PRICE to the current market price. That is, if a warrant to purchase, the price should be below market rates (buy profitable cheaper, right?), if the sale at a higher price. Suppose a trader bought EUR at 1.0150. And the price fell to 1.0120. Trader wants to place a sell order at the price 1.0140. So order price is above the market price (1.0120), it is a limit order. And "crazy trader looks at the price of position opening - 1.0150, and wonders, "лимитник" de for sale must be higher. Now, I hope it is clear what he's wrong?
The Last instrument "stop order" (stop order). Does the opposite in relation to limited order of the function. It aims to buy more expensive than the specified price, or sell cheaper. The price of the stop order to buy is set higher than the current rates, for sale is below. Do not hurry to decide that this is a useless and unnecessary tool because its fulfillment is obviously leads to losses. This is the most important instrument of the trader, it is based on the protection against the deterioration of prices and, thus, from large losses (though such protection reminds a lizard, drops off a tail or a wolf отгрызающего paw, which fell in a trap.
An interesting question is - do I order work at a specified price? In the basis of the same principle - the minimization of benefits to the trader. That is, лимитник works precisely the same price that it contains. I had a case when the price jump jumped my лимитник 120(!) points. I broker (Bank, among others) opened position exactly at the price of the order, and I immediately formed a loss of 120 points. I have argued that there has been no intervening "ticks" in any information system, the broker remained steadfast, he was such a price! Fortunately, these situations are very rare, in my memory one or two cases.
Another thing - stop order. It often happens that when it is triggered, You have 1-5 additional points of loss. This is called a "slippage". If the "slippage" more or occurs at a calm market (where it should be) - find another, more honest broker.
In recent years, there have been variations discussed above orders - orders pending when the order comes into force after actuation of the other orders; orders relating to fire when the one cancels the other and so the Presence or absence of such varieties enables the use of complex multi-strategy (but I'm not sure of the effectiveness of such). The essence of orders does not change and these "hybrids" I will not consider peculiarities of their work should clarify with your broker.
Take a Special place orders Stop Loss and Take Profit. This is a common limit and stop orders, but tied to a specific open position. Take Profit closes position in achieving the planned amount of profit, StopLoss also closes the position, but when reaching the stop loss is an order to protect the Deposit from further growth of losses. StopLoss - the guillotine, chops off a part of Your money and throw You out of the market, catapult, it's always painful, but at Forex so who can not chop off a finger often loses his head (but not always).
What happens if You try to install an incorrect order, for example, buy limit order at a higher price? Theoretically it will be instantly executed at a specified price. It's still on the market, where the price for potatoes 12 rubles per kilogram, You shout buy at 15 rubles!". Of course, a seller there instantly. And at what price? The question is not easy. If You were a market - maker and put such a price on the market, of course, on 15. But You are a trader who works at least two intermediaries. Therefore, Your order is executed at the highest at the market price-12 USD. If You are in such a situation, a place sell stop order at 10 rubles - it also will be executed immediately. Who refuses to buy 10 if a price is 12! But stop fulfilled exactly 10 (although the rates on the market and no). Think You have guessed why. The broker itself can outbid at 10 potatoes and sell immediately on 12 and get a profit 2 USD. Fortunately, the majority of brokers do not let You make this mistake. They are not required to designate a type of order, and, if You put an order to buy at a higher price, the broker understands is a stop at a lower limit. However, where required to determine the order type, usually trading terminal warns that this order will be executed immediately. When you work on the phone operator, of course, notify You of the error. But he's a man may be mistaken. So think trader and calculate the consequences of their actions are also necessary.
finally, we consider the limit on the difference between the prices of the production. In the following sections we will, among other, to consider "пипсовые" strategy, that is, oriented at gaining profit, measured by units of paragraphs (a little - but often). Seemingly open position, just put a take profit of 1 point, and wait, when due to fluctuations) rates it works. And so 100 times in a row I'll give you 100 points in a day. But these are just dreams. First, You forget about spread. To get profit of 1 point, you have to wait at least 6 points (if the spread is 5 points). But even this seems to be a winning strategy, because brokers are profiting from the client losses (cuisine), do not allow to place an order closer than a certain Delta from the current price. This Delta may be from 5 to 15 points at different brokers. Since I see no objective need for such restriction (although, perhaps, it is introduced by the market - makers and brokers has to obey), there is a great suspicion that all these brokers - "cuisine". On the other hand, I have not seen brokers without limits orders. So maybe they cuisine? I don't know...
In any case, before work, clearly understand, what are broker there are orders, what are the peculiarities of their placing and execution, read the agreement carefully, ask a broker questions by e-mail, work in demo mode where you try to drive the wrong order with the "wild" prices. And only fully understand all the nuances can start trading.
About how and when to put order, consider one of the following articles, devoted to trading strategies.
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