Forex trading has an element of risk involved in it just like that of the stock market operation. This is primarily due to fluctuations in the prices of foreign exchanges and market volatility caused by demand-supply dynamics. Know more broker in uae.
To know what are the differences between Limit Order and Stop Order in foreign exchange trade, you must first know what the terms Limit Order and Stop Order means.
The term Limit Order refers to a limited quantum of order that you, as a Forex trader, can buy or sell foreign currencies. Stop Order is a trading method in Forex under which you specify a particular price at which you would like to either buy or sell your stock on foreign exchange.
It would be important for you to know that the rule of buy, hold and sell as applicable in the regular stock exchanges is also applicable in Forex trading. In Forex trading, buying, holding or selling depends on the market dynamics.
How to Limit Order & Stop Order Helps You Earn Profit
If you are a Forex trader, you should issue order your broker different orders. It is now up to the brokers to how they act. In other words, how your broker formulates the strategy to trade in the Forex on your behalf.
A wise Forex broker can help you earn profit by executing your order at the price specified by you. This is Stop-Limit Order. This means the broker will stop at the limit of the price specified by you to buy or sell the foreign exchanges.
Your Forex broker will stop once your stop-limit order already specified is reached in the foreign exchange market. At this pre-determined price, the broker will buy or sell the Forex on your behalf.
This Limit Order and Stop Order are the most common strategies of online Forex trading. Under this market strategy, you as a Forex trader issue order to yourbrokerto trade only on the pre-determined price set by you.
Tips For Booking Profit Through Limit Order & Stop Order Methods
The forex market is highly volatile. The price curves of foreign exchanges may frequently go upward or move downward due to a number of reasons including the current situation, fluctuations in prices of gold and petroleum andthe situation of the global economy.
It is against this backdrop that you should play cautious about the Limit Order and Stop Order market strategies. To play wisely under the volatile conditions of the Forex market, you should take the following moves based on the differences between Limit Order and Stop Order:
· Study the prevailing price Differences (buy & sell) and take decisions accordingly (to know whether it is the best time to buy or sell at Limit Order and Stop Order).
· Determineyour Limit Order and Stop Order after studying the volatility in the Forex market for some time (watch the market fluctuations for about a week or fortnight).
· Do a Trend Analysis of the performance of selected foreign currencies in the market. This analysis will help you the exact picture of the Forex market for a given period. You will know how selected hard currencies are being traded.
· Be in touch with your broker regularly to know the actual condition of the Forex market in operation. This will help you to take a decision on your Limit Order and Stop Order.
Why Limit Order & Stop Order Considered Safe In Forex Trade
Limit Order and Stop Order are methods that you can consider as safe for you in Forex trading. These two types of Orders to your broker safeguards you against any loss in the highly volatile foreign exchange market.
Your safe-playing in the Forex market through these two time-tested methods hinges on the saying that they (i.e. the two methods) are the best ways to Stop-Loss.
Under these two market strategies, your Forex broker will not exceed the limit to either buy or sell foreign exchanges than the ones specified by you. Your broker knows the pre-determined price bands of Forex.
Trading by the broker concerned will also be done accordingly to minimize the risk factor. As a result, you gain from the Stop-Loss factor.
How to Limit Order & Stop Order Works To Prevent Your Loss
This strategy shields against probable loss. In Forex trading, you may incur a loss if you play recklessly in buying or selling spree. These two methods allow you to play safely.
Limit Order and Stop Order can help you prevent a loss in the following manner:
- Your broker does not indulge in market speculation to invest in Forex for you on the basis of his own decision. Speculations may lead to loss.
- The ultimate key regarding the investment remains in your hand. You are your own boss.
- To safeguard your investment, you yourself decide on buy, hold or sell rather than leave it to your broker.
- Not the broker but you are the boss of your investment-related market decisions. Usually, the brokers (particularly the Bulls) try to persuade their clients to invest in larger volumes (in money terms). If you are not setting a price band, they might pursue you to sell or buy in large quantum. Here, some risks may be there regarding your decision.
- On market conditions of heavy fluctuations, your risk is minimized by the pre-determined price bands that you have already fixed. As a result, price fluctuations or high price volatility may not affect your investment much. Know more our latam website.
Conclusion
Forex trading can be a good avenue to earn money. But earning money always depends on your decisions. If you are not a danger taker or inclined to speculative trading in Forex, you should adopt these two methods to play safe and safeguard your investment. Those Forex traders who do not have much loss-bearing capacity should always resort to these two methodologies to eliminate the undue risk factor. Additionally, the Limit Order and Stop Order usually helps you earn profit.
