Order types
An order is how you enter a trade: right now at the current price, or in advance at the price you want.
Order types — what it is?
A market order fills immediately at the current price. It's simple, but it's exactly where slippage happens: in a fast move the real fill will be worse than the price you saw on screen.
A limit order fills only at your specified price or better. It's the main tool when you've marked out a zone in advance and are waiting for price to come back into it.
A stop order turns into a market order once price reaches it. Stop loss and take profit are special cases: exit points from a loss and from a profit, set in advance.
Order types — how it is built?
Working from zones almost always means limit orders: price comes to you, you don't chase it. A market order is justified when there's nothing left to wait for and the entry is confirmed.
Order types — common mistakes
Entering at market behind an impulse. That's the most expensive way to end up in a trade.
Cancelling or moving your stop loss as price approaches it. A stop is moved only to breakeven and only per plan.
Placing a stop "by eye" instead of calculating it from structure and position size.
Forgetting about slippage on news: the real risk turns out larger than the planned one.
Related to
Glossary
- market order
- executed immediately at the current price.
- slippage
- execution at a price different from the one requested. It happens more often on news and in thin liquidity.
- limit order
- executed only when the stated price or better is reached. Used when you are waiting for price to come back into a zone.
- stop order
- turns into a market order once the stated price is reached.
- stop-loss
- an exit level set in advance for a losing trade.
- take-profit
- a level set in advance for locking in profit.