In Forex Trading What Does Stop, Limit And Trailing Mean? | All About Money Online

  • Stop = your action to close an opening position. You can stop at anytime at any price. As such, you need to monitor the fluctuation.
    Limit = your action pre-setting a limit order to close an opening position at specific price. As such, the opening position will be automatically closed once the pre-set price is hit.

    Comment by Fx — November 18, 2009 @ 6:50 pm

    • Stop means that when a currency that you are trading in, hits a certain price, that you close that position immediately. It is usually called a stop-loss because you put that on your order to make sure you do not lose your investment, or better yet, to safeguard part of your winnings on the open trade. A trailing stop is one that moves up as the price goes up, or down as the price goes down (that depends on what kind of position you have. Sometimes you want the price to go up and other times you want it to go down). The downside to the trailing stop is that it can kill your position. Like you go out and you make 20 pips, but after a very small price fluctuation, the price continues to move in the right direction and you might have made 120 pips. It is a risky business to be in, though lot of fun and can be a great source of income. I recommend you study it carefully and practice on a demo account for a few months before trading with live money.

      Risky because the prices move all the time and very rapidly so you can lose a lot of money in very little time. On the other hand, with proper training and trading tools, it is less risky because forex trading is fully transparent unlike stocks where you never know if companies are telling the truth about their earnings and future prospects.

      Comment by Caroline — November 18, 2009 @ 6:50 pm

    • Limit, is an order to close a trade when the market moves a specified amount to the advantage of a position. For example, if a trader longed EURUSD at 1.2500 and was had a profit target of 15 pips, a limit order would be set at 15 pips above the current market price at 1.2500 + 0.15 = 1.2515. Trailing stop The trailing stop is a feature attached to stop-loss orders, where the stop (safety net) position is automatically moved to the trader’s advantage as the market moves to their advantage.

      Before trailing stops, traders were forced to routinely manually change stop-loss orders as their positions move to their advantage. The trailing stop, or often just T-Stop, is designed to automate that trailing strategy, moving the stop-loss a pre-specified amount when the market moves that amount in the position’s favor

      Comment by D — November 18, 2009 @ 6:50 pm

    • Market Order With this type of order you agree to enter or exit the market as soon as your order can be filled, regardless of the price. Each of the online forex trading platforms offers real-time streaming forex prices with fast, easy and efficient one-touch order execution. The market order allows the client to follow the real-time bids and offers on the screen that can be executed with a click of the mouse. The most advantageous aspect of the market order is the ability for the trader to capture better fills. Limit Order A Limit Order (also known as an Or Better Order) indicates that you want to buy or sell a given currency at a specific price or better. For example, you place an order to buy 100,000 euro at 1.0950. The platform will automatically fill your order when the offer reaches 1.0950. Limit orders can be placed to both buy and sell. Usually this type of order is used when price is more important than time. Stop Order With a Stop Order, you specify a price at which you’d like to buy or sell foreign currency contracts. A stop order is a type of limit order that is placed to “lock in” a specified gain or loss, closing the position. Typically a risk management order used by clients to help manage their market exposure, this type of order can also be used to enter into a new position. Stop orders can be used to both buy and sell foreign currency contracts. The traditional “stop-loss” order is used by forex traders to prevent losses in excess of pre-determined acceptable risk levels. Virtually all professional forex traders determine both their profit targets and risk levels prior to entering each and every trade. For example, if you bought GBP/USD at 1.7480 you could enter a stop-loss order to sell at, say, 1.7460. This would effectively limit your potential loss on the position to 20 pips if the price fell. The “trailing stop” is used to lock in profits. For example, if you bought GBP/USD at 1.7480 and the price has risen to 1.7520, giving you a profit of 40 pips, you may want to lock in a certain amount of that profit in case the price falls back down. You would simply place a stop order to sell at, say, 1.7510. This assures that if the price does drop, your position will be closed automatically with a profit of 30 pips. If the price keeps increasing and the position becomes even more profitable, the trader may move his or her trailing stop up yet again, thereby “locking in” more profits. The stop order can also be used to enter into a new position. For example, if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected support-level of 1.3185 that the EUR/USD will continue to fall in price until it reaches a lower support level around, say 1.3150, then you could place a “sell-stop” order at 1.3180. The sell-stop order will trigger an automatic order to sell at the market once the EUR/USD is 1.3180 bid, allowing you to potentially capture profits from the expected downward price movement. Conversely, if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected resistance-level of 1.3225 that the EUR/USD will continue to rise in price until it reaches a higher resistance level around, say 1.3260, then you could place a “buy-stop” order at 1.3230. The buy-stop order will trigger an automatic order to buy at the market once the EUR/USD is 1.3230 offered, allowing you to potentially capture profits from the expected upward price movement.

      It is important to note that, by convention, “buy limit” and “sell stop” orders are entered in below the current market price. “Sell limit” and “buy stop” orders are entered in above the current market price.

      Comment by Marc — November 18, 2009 @ 6:50 pm

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