Order Types

ADVANCED-FOREX normally accepts the following order types and they may be placed either online or by phone. A market order is an order to buy or sell at the current market price. Customers using ADVANCED-FOREX's online currency trading platform click on the buy or sell button after having specified their deal size. The execution of the order is immediate. Placing a market order by phone is similar but normally takes a few seconds longer.

The exact process goes like this:

• The customer specifies the deal size and the currency pair to the dealer.
• The dealer then follows with a two-way price (BID and ASK price).
• The customer will then accept these prices or he may ask for a re-quote.
• This trade is confirmed by the dealer. Under normal market conditions, ADVANCED-FOREX dealers usually responds to market orders in about 5 to 10 seconds at most. Let’s assume that the customer accepts the deal immediately on the offered prices then the phone deal may be completed within 10 to 15 seconds on average.

When you make the choice to deal with either ADVANCED-FOREX or another firm, you should be conscious that it is normal market practice for such institutions to quote two-way prices to a customer who wishes to trade. A firm that is remiss in this is almost certainly taking advantage of their customers' ignorance as far as trading procedures and practises are concerned.

Limit Orders

This order essentially contains two variables, price and duration. The forex trader specifies the price at which he wishes to buy/sell a certain currency pair and also specifies the time frame that the order should remain active. Therefore the “limit order” is, in effect, an order placed to buy or sell at a specified price.

GTC (Good till cancelled): The dealer will not cancel the order at any time. A GTC order remains active in the market until the trader, themselves decides to cancel it. It is therefore the customer's responsibility to remember that he possesses the order.

GFD (Good for the day): A GFD order will remain active in the market until the end of the trading day. Since foreign exchange is an ongoing market the end of day must be a set hour. For ADVANCED-FOREX the end of the trading day occurs at exactly 23:00 CET.

Stop orders

The stop order is an order placed to buy or sell at a specific price and it may contain the same two variables, price and duration. The primary difference between a limit order and a stop order is that stop orders are usually used to limit loss potential on a transaction whilst limit orders are used to enter the market, add to a pre-existing position and profit taking. These same variations are used to specify duration as in limit orders (GTC and GFD). Let's take the following example:

Example: Trader x Buys EUR/USD 100'000 @ 0.9340, he's expecting a 60 to 70 pip move in the market but he wants to protect himself in case he has overestimated the potential strength of the Euro. He or she knows that 0.9310 is a B support level so he or she places a stop loss order to sell at that level. Trader x has limited his risk on this particular trade to 30 pips or USD 300.

To put this another way, an example of a stop order could be when a trader is expecting a price breakout to occur and wishes to grasp the opportunity to 'ride' the breakout. In this case the trader will place an order to buy or sell 'on stop'. To illustrate the logic behind this let's review the following example:

Example: Trader x sees EUR/USD breaking through the 0.9390 resistance level. He believes that if this happens, the price of EUR/USD could be headed to 0.9450 or over. At this point the market is at 0.9350 so trader x places an order to initiate a buying position of 500'000 at 0.9392 'on stop'.

OCO

An OCO (order cancels other) order is a mixture of 2 limit and/or stop orders. 2 orders with price and duration variables are placed above and below the current price. When one of the orders is executed the other is cancelled. To illustrate how an OCO order works let's take the following example:

Example: The price of EUR/USD is 0.9340. Trader x wants to either buy 500'000 at 0.9395 over the resistance level in anticipation of a breakout or initiate a selling position if the price falls to 0.9300. The understanding is that if 0.9395 is reached, he will buy 500'000 and the 0.9300 order will be automatically cancelled.

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