How does a buy limit or sell limit work?. What does it do exactly.
How does a buy limit or sell limit work?. What does it do exactly.
we use limits in forex trading to execute the trades automatically, the concept of the buy limit and sell limit is risky, in case of buy limit we put a the limit below the movement of the market suppose in any currency the market is moving at 100 pips and we want to put a but limit their then at that time we will put the buy limit below the movement mean at 90 or 80 pips, when market touch the below limit limit the trade of buy will be execute their, and same for the sell limit we will put the limit in upper side of the market at 120 pips or at any point which you want when market movement will touch that pips the trade will be execute their and it will be trade of sell, so these is the process of moving the market and this process is very beneficial in trading for us.
In forex trading or placing a trade there are two types of executions which are instant execution (this happens at the current price) and the pending orders.The pending orders have to do with the future price.When a trader based on his analysis believes that the current price is not the best for trade decision knowing full well that there is a future price where the decision will lead to maximized profit and minimized loss.In this case when a trade projects or places the order to buy a particular instrument or asset at a price lower than the current price then it is a buy limit order.At the same time when the order to sell is at a higher price that the current price then it is referred to as sell limit order.
Buy limit and sell limit are basically meant to be where price had not gotten to in order to make money from the forex business, we are anticipated that prices will automatically move to those levels so that our order can be trigger so that we will make money if we are facing profitable in the market which is quite good, but using pending orders on the forex market also have the key disadvantages because we cannot understand which trading will work out and the ones that would fail, hence we need to put energy into understanding the business so that our trading accounts can have what we are expected to gain in the forex market, sometimes these things are very important.
Buy limit and sell limit are both in the family of the pending orders, among them is the sell stop and buy stop etc.
Buy limit are both used to buy and sell a currency pair the market below or above the current price.
Buy limit : example if a trader buy below the price, for example if the current market price of gbpusd is at 1.3124 if we wanna, place buy limit we can set the order at 1.3115 or below.
Sell limit: if price is at 1.3124, the then the sell order will be at above the current price let's say 1.3150 above.
So the use of this order is not as complicated, but to fully understand how to use the order we can practice it on demo account.
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Executing sell limit or buy limit trades in the market is one of the available ways in the market for a trader to get into only trades that he desires. This way, a trader is guaranteed to only enter into trade that he plans and not lose more than he can actually handle, if you will ask me I will say this is a good way to manage risk connected with a live account. Many atimes, after a trader might have been done with his analysis process, he wishes to enter into certain trades which might not be the best time to enter into the market as at the end of his analysis, if at all he is sure of his trade all he has to do is to set a sell or buy limit depending on what his analysis requires of him.
There are three type of market order. One is instant execution. Second is stop order and Third is limit orders. Limited orders are also called stop loss or trading stop. They have a great benefit in the forex trading. Mainly they have two types.
Buy Limit Order:
An order to buy at a specified price when the market moves down to that price.
Sell Limit Order:
An order to sell at a specified price when the market moves up to that price.
We often used it as a stop loss level. Stop loss are limit orders. If we have a buy position that we used sell limit as stop loss. If we have sell position then we used buy limit as a stop loss. If buy position in some profit, then we used sell limit to trail and lock the profits. If sell position in profit then we used buy limit to lock the profits. If I have a analysis that price will rise after a dive then I used buy limit order for my trader. If in my point of view, price will began downward after some rise, then I used sell limit.It is a very good tool that is very essential for trading. Without using the limit order, trading is not possible. Most of the traders used the stop loss. They are actually the limit order.
the forex trader could place a deal, referred to as opening a position, either instantly or at a future time. the future time order is not placed at market price, but a price is set by the forex trader at which time he plans to open the deal. this is known as pending orders. in a situation where a buy limit order is set. the trader wants to buy when price moves lower than the current price. so he sets a lower price and immediately price gets there, the deal is executed. in the case of the sell limit, the trader wants to sell, but a higher price than the real market price. so he sets a price higher than market price. when price gets to that level, the deal is automatically opened.
''Too many times we settle into a set way of thinking and accept limitations that need not be placed on us'' -John C. Maxwell
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In forex trading market ,before a trader can place any trade he must first analys the trade and see how far the market is going to move and having spoted this the trader will now decide how far he want the trade to go and then place a limit there . In forex trading market, the market is either sell or buy sequel to this the trader after thorough analysis of the market and see how fat the market is going to buy the trader will now put is buy limit at his desire point and when the market now get there it will automatically end the market while the sell limit on the other hand when the trader analys and see that the market is going down the trader will now put sell limit to his desire limit to sell when market now get there it will automatically end the trade..This tool is very important in the market especially when the trader is trading on long time frame and it very good to the trader if properly analysis is carry out but still have it shortcomings when the trader put the limit and the market is highly volatile it reduce the profit to which the trader could have reap from the market.