The term “order” refers to how you enter or exit a trade. As long as the market runs 24 by 7, there is a need for some form of automation in order to be able to enter or exit the market accordingly. Also traders need to ensure that their open positions remain within certain bounds even if they are away from their trading terminals. Hence they have several order types available at their disposal. Below, we will present the types of orders available in cTrader and how they can become helpful in your trading activity.
“Man, I got to be in this move. I have to enter the market right now!” — This is a market order!
The market order is probably the most basic and often the first order type traders come across. It is executed on a real time basis when placed. Sometimes, because of the fluctuation of the market, there can be a difference between the rate at the time the market order is sent and the actual execution price, a phenomenon known as slippage.
Typically, scalpers and day traders use the market orders in order to get into the market instantly execute their strategies quickly.
Market orders are always executed based on the Volume Weighted Average Price (VWAP). An interesting feature of cTrader is VWAP DoM where you can see the list of the expected VWAP (volume-weighted average price) prices next to the list of the adjustable volumes. VWAP DoM is especially useful when trading large volumes because it shows an average price for the volume traded.
cTrader allows you to enter a trade directly in the VWAP DoM table!
Note that when you hover over the lots amount, the order details like Pip value, trade value, commission, etc. will be calculated automatically and displayed in the pop-up.
Trading in VWAP DoM is an easy process! Firstly, select the required order volume from the drop-down (alternatively, type it in or use the toggles) and click on the price to the left to create a Sell Order or to the right to create a Buy Order respectively. Note that if the QuickTrade mode is disabled, then the Create Order dialog box will pop up. With QuickTrade enabled, an order will be sent without any confirmations according to the current QuickTrade settings.
Volume weighted average price (VWAP) is the weighted average execution price for a given trade based upon multi-tiered levels of liquidity, with each tier having a corresponding price and volume.
This method of execution allows the user trading larger trade sizes to sweep through the tiers and execute with all available prices throughout the various tiers until the order is filled or until all liquidity has been exhausted.
Example: Trade Buy EURUSD
Given the above ladder a buy trade of 50 lots would execute through the top 4 price levels (starting at Tier 1) as follows:
- 1 lot at 1.09273
- 15 lot at 1.09271
- 30 lot at 1.0927
- 4 lot at 1.09268
The average price for the total amount is calculated at an average price of the above.
Calculation: ((100,000/5,000,000)*1.09273) + ((1,500,000/5,000,000)*1.09271) + ((3,000,000/5,000,000)*1.0927) + ((400,000/5,000,000)*1.09268) = 1.092702
As you can see in the above example, there is a slippage between the opening price and the spot price equal to 0.2 pips.
It’s too often that traders have to sit for days in front of the monitor, waiting for certain conditions for entering into the market. An easier way to shorten your waiting time without losing a profit on a trade is using pending orders.
It is executed when the price hits a certain level that you have already set. So, just decide a price you wish to trade at, and the system will do the rest!
A pending order falls into two categories, limit order and stop order, which are summarized in the following picture:
A limit order is an order that will be executed when a certain price is reached, but only at the limit or a better price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher.
You are flexible to be very precise in defining the entry or exit point of a trade. While limit orders do not guarantee that you will enter into or exit a position, they help ensure that you will not receive a worse price than what you request for. Remember that, till the order is executed, it remains a pending order that doesn’t affect your margin.
One of the main features of cTrader is the support of partial fills. Partial executions occur when there are not enough matching orders/liquidity to fill an entire order at the specified price or better. In such cases, partial fills allow an order to be filled only for the part that is possible based on the available liquidity and the requested order restrictions. If an order is filled partially then it remains active until canceled or expired and when market conditions allow this the rest of the remaining order is executed.
Buy Limit Order Example
We created a Buy Limit order at 38.2% Fibonacci level, because we were waiting for a pullback, as long as this level worked as a support. When the price hit that level, then the order was executed.
Sell Limit Order Example
We created a Sell Limit order at 38.2% Fibonacci level, because we were waiting for a reversal as long as this level worked as a resistance. When the price hit that level, then the order was executed.
The stop order is used to enter the trade if the market moves in your favor. A stop order can be used for trading breakouts. Think like your favorite pair would rally further after a move above a certain level, then you would place a buy stop order for entry a pip above that rate. As the market hit that level, your buy stop order would become a market order and be executed at the next best price available.
On the other hand, think a symbol’s price would drop further after a move below a certain price, then you would place a sell stop order for entry a pip below that price. As the market hit that level, your sell stop order would become a market order and be executed at the next best price available.
It’s good to know that stop orders are essentially executed as market orders so slippage is possible.
Buy Stop Order Example
We created a Buy Stop order to a pip above the 61.8% Fibonacci level. After the price hit that level, then the order is executed.
Sell Stop Order Example
After the EURUSD broke the 38.2% Fibonacci level to the downside, it pulled back to that level. We created a Sell Stop order to a pip lower than the previous candlestick’s low price. When price hit this level, then the sell stop order was executed accordingly.
Stop Limit Order
A stop limit order combines the features of a stop order and a limit order. When the symbol hits a stop price that you set, it triggers a limit order. Then, the limit order is executed at your limit price or the best available. You can use stop limit orders in an attempt to limit a loss or protect a profit, in case the price moves in the wrong direction.
Keep in mind that the market fluctuates, so your order may not be executed, or it may cause the order to trigger at an unfavorable price as long as it’s a stop order. Further, if the market jumps between the stop price and the limit price, the stop will be triggered, but the limit order will not be executed.
Buy Stop Limit Order Example
We created a EURCHF Buy Stop Limit order just above of a few minutes ago high point, waiting for an uptrend if price broke that level to the upside. At the same time, as long as we wanted to minimize a potential loss of profit in case that there was a gap, we also created a limit order. The above combination of the both orders is a Buy Stop Limit order.
Sell Stop Limit Order Example
We created a EURCHF Sell Stop Limit order a few pips below the yellow trendline, waiting for a downtrend if price broke the trendline to the downside. At the same time, as long as we wanted to minimize a potential loss of profit in case that there was a gap, we also created a limit order. The above combination of the both orders is a Sell Stop Limit order.
Stop Loss / Take Profit
When you place a market or a pending order, you can also enter a price limit, named Stop Loss (S/L), and once this limit is reached, then the open position will close to prevent further losses.
A Take Profit (TP) works in a similar way — it automatically closes a position once a profit target is reached to lock in profits.
You should note here that SL and TP orders may not be executed at a specific price, as there may be market gappings.
Consider also where to place your stop loss once you ‘ve entered into a trade. It depends on your risk tolerance and your trading behavior in general. It should be at a level that you don’t get stopped out too quickly, but not lead to a big loss if the price goes the opposite.
Take Profit and Stop Loss Example
We see that the EURUSD is moving into the orange channel. We can use the upper band as resistance and the lower band as support. In our following example, we enter into the market with a short position with a Take Profit at the lower band. Next, we enter into the market with a short position again with a Stop Loss above the upper band. As it breaks the upper band to the upside, the Stop Loss is activated.
Choosing the correct type of orders depends on the current market situation and on your expectations on the market move. For instant trades, market orders are essential. However, limit and stop orders or stop-loss orders and take-profit orders are pending and are only triggered if the price hits a certain level.
Let’s note once again, that Stop-Loss orders should ideally be used by all traders in order to avoid high losses.
Remember that knowing when and how to use the orders is one of the keys to a professional trading activity!