The concept of pending orders may seem somewhat complicated for new traders, and it may not be clear to some how they are used or even the reason for their use in the first place compared to standard trading orders. Pending orders help automate trading operations while remaining in the market without the need to spend long periods in front of the Forex platform. There are four main types of pending orders that can be divided into two main groups (each of which are the most common orders):
Buy the limit Use this order if you want to buy the currency pair (open a trading position) at a level located below the current price. For example, let’s assume that the EUR/USD pair is currently trading at 1.2378 and you thought it would fall to 1.2300 before it climbed again. If you want to place a purchase order that is automatically activated once the price reaches 1.2300, then you will have to use the pending limit purchase order, which allows entering into the trade at a price better than the current price.
Sell the limit is to be used when wanting to sell the currency pair (open a trade) at a level higher than the current price. For example, if the GBP pair is currently trading at 1.4531 and you think that if it rises to 1.4700 it will bounce lower after touching this level. In this case, you can use the pending limit sell order if you want the brokerage firm to open a short position for you once the price reaches 1.4700. As with the limit purchase order, the limit sell order aims to enter the trade at a price better than the price currently available in the market.
A stop purchase is a pending order to buy a currency pair (open a buy position) at a price above the current price. For example, if the Yen pair is currently trading at 92.46 and you believe that reaching the 92.55 level will trigger a new bullish trend (for example as a result of breaking one of the important resistance levels). In this case, you can use the pending buy order if you want to open a long position automatically once the price reaches the 92.55 level.
A Sell Sell Spread is a type of pending order that is used to sell the currency pair (open a sell position) at a level below the current price. For example, if the EUR / JPY pair is currently trading at 114.28 and you believe that a drop in the price to 113.40 will trigger a strong bearish wave (for example due to breaking one of the important support levels). In this case, you can use the pending sell order to automatically open a sale once the price reaches 113.40. A suspended sell order assumes that you are ready to sell at a less favorable price than the current market price available.
Stop loss is an order used to prevent heavy losses in a position. This order is activated once the price reaches the specified level. A stop-loss order is placed at a level higher than the current price in the case of short positions while it is placed at a level lower than the current price in long positions. A stop-loss order is included within a buy-to-sell in relation to a short position, while a stop-loss order is included in the buy position. Almost all Forex brokers provide trading platforms that allow the use of a stop loss order and attach it to orders or trading positions.
Take profit is an order used to close the position after achieving the required amount of profit. As with stop loss, the take profit order is automatically activated when the price reaches a specified level. A take profit order is placed at a level lower than the current price in the case of short positions, while it is placed at a level higher than the current price in long positions. This order falls under the purchase of the limit with the sale deals, while it falls under the sale of the limit in the case of purchase deals. Almost all trading platforms allow take profit orders to be attached to trading positions and orders.
After reading this article you are supposed to be able to use pending orders without major problems.