Types of Orders in Forex Trading and How They Work
Forex trading does not simply consist of selling or purchasing a currency pair. Traders employ several types of different orders that describe how and when to enter a trade in order to make trades effectively. Orders are directives to the broker, and their understanding is crucial to successful trading, especially where it involves risks or using price action.
In this article, we will simplify the different types of forex orders, explain how they work, and assist in how to choose the right order type based on your trading goals and strategies.
What Are Orders in Forex Trading?
A forex trading order is an instruction by a trader to a broker or trading platform to execute a trade. It dictates what currency pair to buy or sell, in which direction to trade, at what price level, and under what terms of execution. Orders are indispensable to trading because they enable traders to enter or exit the market in a systematic way, without necessarily needing to monitor prices constantly.
Forex orders are placed through electronic trading systems, which relay the orders to the broker. The broker then fills the order based on the provided conditions—immediately or when the price levels designated are reached.
How Many Types of Orders in Forex Trading?
Forex order types are classified into three standard categories based on the intention and when they should be executed:
- Market Orders: They are executed immediately at the current market price for the convenience of rapid entry or exit of trade.
- Pending Orders: These will be activated in the future when certain price levels are reached.
- Pending Exit Orders: These are linked to existing positions to manage risk and lock in profit automatically.
Understanding how each order type works will allow traders to better align order selection with strategy and market conditions.
1. Market Orders
A market order is an instruction to buy or sell a currency pair at the current best available price. This type of order prioritizes speed of execution over price. Market orders can be divided into two main actions, each having a specific use depending on whether you want to trade long or short:
Buy Order
A buy order is executed at the ask price, or the cheapest price available which a seller is willing to accept. Buy orders are applied by traders in order to go long immediately.
Sell Order
A sell order is executed at the bid price, or the highest price available which a buyer is willing to pay. Sell orders are utilized by traders to close a long position or go short immediately.
Example:
If EUR/USD is now trading at 1.1000/1.1002, a market buy order will be filled at the price of 1.1002 (bid price). A market sell would be filled at 1.1000 (ask price).
2. Pending Orders
Pending orders can be used if you want to enter the market only when the price reaches a particular predetermined point. Unlike market orders, pending orders give you additional control by waiting for certain conditions in the price to be met. There are two principal types under this category, each for different market conditions and strategies.
Limit Orders
Limit orders are used when traders would prefer to enter the market at a more favorable price than the current market level. The orders provide improved price control and are optimally used for range-bound or pullback strategies.
- Buy Limit: Place an order below the current price to buy low
- Sell Limit: Place an order above the current price to sell high
Stop Orders
Stop orders are used when traders want to enter the market once price momentum has determined direction. In contrast to limit orders, stop orders are placed beyond the current market price and are filled as the market trades through a specified level.
- Buy Stop: Place an order above the current price to buy on breakout
- Sell Stop: Place an order below the current price to sell on breakdown
3. Pending Exit Orders
Pending exit orders are used to automatically close a trade once specific price levels are met. They differ from entry orders as they are tied to open positions and help manage outcomes without active monitoring. Below are the main exit orders used in forex trading:
Stop-Loss Order
A stop-loss order limits losses if the market turns against your trade. It is a market order when the price reaches the stop level, closing the trade to prevent further loss.
Take-Profit Order
It is a close position order when the price hits a target level that locks in profits. As a type of limit order, it helps lock in gains when the market moves against your favor.
Stop-Limit Order
This order triggers a limit order if a specific stop price is reached. It provides further control over the execution price, but entails the risk of non-execution when the market moves with high speed.
Trailing Stop Order
A trailing stop is a flexible stop-loss that follows the market price at a fixed distance. It moves with the price when it’s trending in your direction but does not change position when the market reverses, helping you lock in profit while still allowing room for additional improvement.
4. Advanced Pending Orders
Beyond the standard categories, experienced traders often use advanced pending orders to refine their strategies and improve risk control. These order types combine or enhance basic functions to handle complex trading situations:
Bracket Order
A bracket order is a comprehensive setup that includes an entry order, a stop loss, and a take profit. By using a bracket order, traders can manage risk and target profits automatically without constant monitoring.
OCO Order (One-Cancels-the-Other)
An OCO order places two orders simultaneously, where the execution of one automatically cancels the other. Traders often use an OCO order in volatile markets to cover multiple scenarios without overexposing their position.
Iceberg Order
An iceberg order splits a large trade into smaller, visible portions to hide the full trade size. Using an iceberg order helps prevent major market impact and keeps trading intentions discreet.
Cover Order
A cover order pairs a market or limit order with a mandatory stop loss for reduced risk. Traders use a cover order when they need quick execution while ensuring a predefined risk level.
How Orders Are Processed in Forex
Before a trade is completed, every order goes through a few key steps. Knowing what happens behind the scenes helps traders understand how their orders are handled and what to expect during execution. Here’s how forex orders are processed, step by step:
Step 1: Placing the Order
You place an order on your trading platform (e.g., a market or pending order).
Step 2: Broker Receives the Order
Your broker receives the order details and prepares it for execution.
Step 3: Connection to Liquidity Providers
The broker connects to liquidity providers, such as major banks and financial institutions, to get the best available prices for the currency pair.
Step 4: Order Execution Type is Applied
The type of order you’ve placed determines what happens next. Different order types are handled in different ways by the broker.
- If it’s a market order, it’s filled immediately at the best available price.
- If it’s a pending order, it’s held by the broker until the market reaches your specified price.
Step 5: Execution Method Used
The broker chooses how the order will be filled, based on your platform settings and the broker’s infrastructure. The method affects the speed and price accuracy of the execution.
- Instant Execution Method: The order is filled at the price you set or not at all.
- Market Execution Method: The order is filled at the best price available, even if it differs slightly from your expected price.
- Pending Order: The order will be activated only when the market reaches your set entry or exit level.
Step 6: Final Trade Result
The trade is confirmed and visible on your platform. You can now see the open position in your order list or trading dashboard, along with relevant details like entry price, lot size, and any attached SL/TP levels.
Warning: During high volatility, slippage or wider spreads may occur, affecting your execution price.
This overall process happens in milliseconds, but understanding it helps you plan better and choose the right order type for your strategy.
Modifying or Cancelling Forex Orders
Most trading platforms allow you to modify or cancel both pending and active orders, but only if they haven’t been filled or triggered by market conditions yet.
What You’re Allowed to Do
These are the actions you can typically perform on unfilled or active orders within the trading platform:
- Adjust the entry price, stop-loss, or take-profit.
- Cancel orders before they are triggered.
Limitations
There are restrictions in place to protect order execution integrity and prevent misuse during volatile market conditions:
- Once a market order is executed, it cannot be reversed.
- SL/TP on active trades may not be changed during rapid market movements.
Choosing the Right Types of Orders
Selecting the right order type depends on your trading style, trading goals, and how much control you want over execution speed and price. The section below provides a comparison table that highlights the key features, use cases, and suitability of each order type to help you make an informed decision:
Order Type | Best For | Price Control | Execution Speed | Use Case |
|---|---|---|---|---|
| Market Order | Scalpers, news traders | Low | High | Quick entry during volatility |
| Limit Order | Range traders | High | Medium | Buy low, sell high |
| Stop Order | Breakout traders | Medium | Medium | Entry on momentum |
| Stop-Loss Order | All traders | Depends on the market price | High | Risk management |
| Take-Profit Order | All traders | High | Medium | Automated profit booking |
| Stop-Limit Order | Advanced traders | High | Low | Controlled exit or entry |
| Trailing Stop | Trend followers | Medium | Medium | Locking in gains as the market moves |
The characteristics in this table are general guidelines and may vary slightly depending on your broker, forex trading platform, and market conditions. Always verify order functionality with your broker before applying it to a live trade.
Understanding the different types of forex orders is an important first step in your trading journey. If you’d like clear guidance on applying these concepts with confidence, the Forex Trading Academy offers well-structured, easy-to-follow information created to support Indian traders as they develop their skills and grow as investors.
Forex Trading Academy
Every successful trader was once a beginner—Forex Trading Academy is where they started.
Conclusion
Understanding the different types of forex orders helps traders enter and exit positions more effectively, manage risk with greater precision, and improve overall trading outcomes. Whether you focus on scalping, swing trading, or trend following, choosing the right order type can make a meaningful difference. The table above offers a simplified comparison to help you identify which orders align best with your trading approach.
Disclaimer
This content is for educational use only and not financial advice. Forex trading carries risk. Always trade with awareness and use proper risk management.
FAQs
Yes, you can modify pending orders and active trade SL/TP, as long as market conditions allow and the order hasn’t been filled.
Yes, you can place both stop-loss and take-profit to a single position, and also use trailing stops on supported platforms.
No, the availability depends on your broker and trading platform. Always check the broker’s features list.
The five most popular types of forex orders are the market order, limit order, stop order, stop-loss order, and take-profit order. Each plays a distinct role in a trader’s strategy.
Forex orders often include more dynamic options (like trailing stops), while stock orders may differ in settlement times, regulation, and order routing due to exchange-based trading.