The Forex Market is much like the stock market. A order must be given to execute a trade. Every order used is used for a specific purpose, to generate a profit or stop a loss.These orders can be made easily from trading platforms or software so you can make the most profit from your trades.
The buy order is the most common order. This order is used with the ask price which is the price your broker is willing to sell you a currency pair. When you use the buy order in the forex market, you are buying the base currency eg: (the Euro in the EUR/USD pair) and selling the quote currency the “bottom” currency in a currency pair, (such as the US dollar in the EUR/USD pair). All he while hoping the base currincy (Euro) goes up in value.
The sell order is also very common in the forex market. When the sell order is executed, you sell the base currency and buy the quote currency. Use this order to close trades after a buy order. At times the sell order is used for short selling, which means you sell a currency you don’t have and will buy it back at a later time. In this case, you sell a currency pair with a hope that the exchange rate will go down, so you can buy it back at a lower price and make a profit.
Stop loss orders in the forex market are designed save a trader from big losses. After a trade is made, most traders and trading systems are able to set a stop loss point. The price canot fall beyond this point. If the price goes beyond this point, the trade is immediately closed and a loss is prevented. It is good to have a trading system that uses stop losses, mainly to limit risk and potential losses.
Use of Limit Orders is common for traders in the forex market. With this type of order a trader will enter the market when a currency has hit the level the trader had prearranged. Limit orders are used by good traders to take profits and protect profits.