Main Order Types on MetaTrader
This overview is devoted to the main types of orders used on MetaTrader platforms. Orders serve to open and close positions, limit losses and take the profit.
For trading in financial markets, there are two main types of orders used:
- Market order is the simplest and most understandable of all. This is an order to sell or buy the asset at the current market price immediately. The priority of the order is obligatory execution, if only there is enough liquidity in the market. Positions open (or close) at once. When volatility is high, so-called "slips" occur, which means the actual execution price differs from the Bid or Ask price at the ordering moment.
- Limit order is an order to sell or buy the asset at the specified price. Limit orders will not allow making trades at a worse price than said in the order, yet it is not guaranteed that the order will be executed. In other words, the order will be executed only if there is the limit (or best) price in the market. If otherwise, the order will not be executed.
Based on these two orders, there have been creates several order types on MetaTrader platforms. On other platforms, things might work differently.
Here are the main order types for opening positions.
This is a limit order to buy the asset at a price no worse than the specified one. Also, this order can be used when you need to limit the price of a not most liquid asset you are buying.
For example, when Brent oil price is $80, while the trader wants it cheaper — at $70 — they can place a pending Buy Limit order at the desirable price level. The position will open as soon as the Ask price reaches the specified level.
This is a limit order to sell the asset at a price no lower than the one set in the order. This type can be used when you need to limit the selling price of a non-liquid asset.
For example, if gold now costs $1,800, and the trader wants to sell it when the price reaches $2,000, they can place a Sell Limit order at this level. As soon as the Bid price reaches the desired level, a selling position will open.
Buy Stop is a pending order to buy the asset at a price above the current market one. This order is used by the trader to open a buying position when the price grows and reaches a certain level.
For example, if the trader expects EUR/USD to keep growing after it overcomes 1.1700, they can place a Buy Stop a bit higher than this level. As soon as the Ask price rises above the specified level, a buying position will open.
Sell Stop is a pending order to sell the asset at a price below the market price. This one is used for opening a selling position when the quotations go down and reach a level specified by the trader.
For example, if the trader expects GBP/USD to keep falling after it breaks through the support level of 1.3700, they can place a Sell Stop order a bit lower than this level. As soon as the Bid price reaches it, a selling position will open.
Find more about placing and using Buy Limit, Sell Limit, Buy Stop, and Sell Stop pending orders in a separate article in such orders in the R Blog:
After a position is open, the trader needs to specify its closing conditions. As a rule, there are two options: Take Profit for a price going as forecast and Stop Loss for a price going against the trader.
Take Profit is a pending order that closes the position without trader's participation. A placed order automatically closes a gaining position as soon as the price reaches the specified level.
For example, the trader buys Brent oil at $70 and expects it to grow to $100 in the nearest future, where they will close the position with a profit. Hence, they can place a Take Profit at $100, and the position will close automatically, as soon as the quotations reach the level.
Stop Loss is a protective order that limits possible losses in an open position. It automatically closes a losing position as soon as the quotations reach a certain level. Also, with a Stop Loss one can protect their profit, gradually relocating it following the price.
For example, the trader sells gold at $2,000 and expects a correction downwards from this level. But if their forecast turns out to be faulty, and gold keeps growing, they will need some limit to their losses. As such, they can place a Stop Loss order above $2,000 (for example, at $2,010). If the price, indeed, keeps growing and reaches the specified level, the selling position will be closed, limiting possible losses of the trader.
Find more about placing and using Stop Loss and Take Profit in a corresponding R Blog article:
Trailing Stop is a special function of the Stop Loss order that automatically moves the Stop Loss after the price, protecting the trader's profit. The trader only needs to set up Trailing Stop in their trading terminal and go do their other business, while the order will be corrected by the software on its own.
This islnstrument is especially useful when there is an abrupt directed price monentum in the market, or when the trader has no chance to keep a close eye on the market all the time. Trailing Stop will move the closing order after the price momentum until the price reverses and goes in the opposite direction.
Find out more about setting up and using Trailing Stop in an R Blog article:
There are also such important phenomena as Margin Call and Stop Out.
This is a notification by which the broker informs the trader that due to the current losses in all open positions the money on the account is not enough to sustain those positions. The trader then needs either to deposit their account or close some of the positions, otherwise a Stop Out might follow.
Stop Out means forced closing of losing positions by the broker at the current market price when the ratio of the trader's capital to margin reaches a critical level (set by the broker). After the positions close, the trader's deposit will get corrected according to the losses they suffered. Losing positions will keep closing until the said ratio exceeds the Stop Out level.
Read more about Margin Call and Stop Out in an R Blog article about them:
Trading orders are the main instrument of a trader for working in financial markets. Using various types of pending orders, the trader can practice any trading strategy, limit losses, protect or take the profit. They can even do other things while some orders placed in advance do their job automatically.