TRADING: Tips and Tricks for Beginners: Day Trading + Options Trading + Forex Trading + Stock Trading Tips and Tricks to Make Immediate Cash With Trading by Samuel Rees

Author:Samuel Rees
Language: eng
Format: azw3
Published: 2017-08-15T07:00:00+00:00

Chapter 1: Market versus Limit Order

A market order is placed for the current market price, but this price fluctuates nearly every second because more forex investors are setting up their trades. Traders are, especially, active during the morning in the USA and the afternoon in the UK.

Open your trading platform. Watch a currency pair, such as the EUR/USD for 30 seconds. How many times did the price change anywhere between 1 to 5 pips, maybe even 10 pips?

There is a rule in any trading investment:

Rule #1: Buy low, sell high!

Let’s say the price for the EUR/USD is currently 1.1185. You set a market order and the price goes up to 1.1195, but drops to 1.1165 after your market order is filled. Already, you lost 0.0020 pips on the trade, and although the market decides to return in your favor, you are only making 20 pips on the trade after you close out of the position.

Knowing the market is fluctuating, with day traders and other investors opening and closing their trades, you can be smarter and set a price that presents the best profit for you.

You might be thinking, “But, what if I miss out? What if I don’t even make the 20 pips?” There is that possibility that will not be denied. You could set a limit order that will be “rejected,” rather than filled.

This is where experience and planning are imperative. You have to be able to make a decision, fairly quickly, based on the information you are seeing.

For example, if you watch the numbers for 30 seconds and there is only a pip change each second, you know you can set your limit order close to the current market price or below it by a few pips and get the order filled. If the pip change is over a few pips, then you will need to adjust your target to capture the “filled” order versus finding it rejected.

The key is to make sure the market price is bouncing a little and not actually taking off in any given direction for a breakout.

What would happen if you decided to enter with a market order and the dip of 20 pips occurred, but rather than rallying in the direction you want, the price continues to lose pips?

So the price goes from 1.1185 to 1.1165, rebounds to 1.1175 and then heads to 1.1115? The currency pair moved against what you thought. Now, you have lost 0.0070 or 70 pips.

However, if you had a limit order that went unfilled because you set a price that was never reached, then you would have saved yourself from an excruciating loss.

These are the kinds of things you want to be thinking of as you decide when to enter the market, as well as whether to use a market order or a limit order to open a position.

By using a limit order, you can buy or sell a currency pair based on a trading plan, where you have more control of the entry, and limit your losses.

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