Types of Orders in Trading
In trading, orders are categorized into two main types:
- Entry Orders: Instructions to open a trade when the market reaches a specified level.
- Closing Orders: Instructions to close a trade when the market hits a predetermined level.
Stops vs Limits: Key Differences
| Order Type | Execution Trigger | Price Relative to Market |
|---|---|---|
| Stop Order | Less favorable than current price | Worse than current price |
| Limit Order | More favorable than current price | Better than current price |
Stop Orders Explained
Stop orders can be used for both opening and closing positions:
Stop-Loss Orders
- A stop-loss order automatically closes your position when the market moves against you.
- Example: If EUR/USD drops below your entry price, the stop-loss triggers to limit losses.
👉 Master stop-loss strategies for EUR/USD
Stop-Entry Orders
- A stop-entry order opens a position when the market reaches a less favorable price.
- Long position: Placed above current price
- Short position: Placed below current price
- Advantage: Confirms trend momentum before entry
Limit Orders Explained
Limit orders offer precision in trade execution:
Limit-Entry Orders
- Opens a trade at a more favorable price than current market
- Long position: Below current price
- Short position: Above current price
Limit-Close Orders
- Closes a trade at a better price
- Long position: Higher than entry
- Short position: Lower than entry
⚠️ Note: Limit orders may not execute if the price never reaches your specified level.
When to Use Each Order Type
| Scenario | Recommended Order |
|---|---|
| Trend confirmation | Stop-entry |
| Profit taking | Limit-close |
| Risk management | Stop-loss |
| Price advantage | Limit-entry |
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FAQ Section
Q: Which is safer - stop or limit orders?
A: Stop-loss orders protect against losses, while limit orders secure favorable prices. Use both for balanced risk management.
Q: Can stop and limit orders be combined?
A: Yes! Many traders use stop-loss with limit-close orders for complete position management.
Q: How long do these orders remain active?
A: Depends on your broker. Some offer Good-Til-Cancelled (GTC) options while others expire at session end.
Q: Do stop orders guarantee execution?
A: In fast-moving markets, slippage may occur between trigger price and actual execution price.
Key Takeaways
- Stops protect against adverse moves; limits secure favorable prices
- Orders work for both entry and exit positions
- Combine both types for comprehensive trade management
- Understand execution risks for each order type
Remember: Successful EUR/USD trading on OANDA requires mastering these fundamental order types. Practice in demo accounts before live implementation.