Orders Flashcards
Name and explain about the 2 types of market orders and how they make profit
Buy Order - Open with Ask price and closes at Bid price.
Profit = closing price > opening price
Sell Order - Open with Bid price and closes at Ask price.
Profit = closing price < opening price
2 types of Pending Orders and their Subcategories
Limit Orders - orders that is executed at the clients requested price that is better than the current market price.
- Buy Limit
- Sell Limit
- Take Profit
Stop Orders - orders that is executed at the clients price that is worse than the current market price
- Buy Stop
- Sell Stop
- Stop Loss
Explain the 2 extra pending orders (Buy Stop Limit and Sell Stop Limit)
Buy Stop Limit
- combination of both a Buy Stop and Buy Limit
- clients must first set the price for Buy Stop and Buy Limit
- Order will open when the first price reach the Buy Stop price as a Buy Limit Order
- After that, once the price starts moving down and reaches the Buy Limit price, the order will be open as a Buy Order.
Sell Stop Limit
- combination of both Sell Stop and Sell Limit
- clients must first set price for Sell Stop and Sell Limit
- Order will open when the price goes down to the Sell Stop price and order will be opened as a Sell Limit order.
- After that, once the price starts moving up and reaches the Sell Limit price, order will be opened as a Sell Order.
What is stop level? Why do have stop level? Applied to which type of order?
Stop Level is the distance in pips from which pending orders can not be set less than the current spread.
It is to protect the broker’s profit which come from spreads. Usually applied to all types of pending orders.
What is Trailing Stop?
Trailing Stop is a moving stop loss.
It is to manage orders automatically
Protect Position.
How it works?
For example, a client opens a Buy Order and sets the TS at 10 pips (100 points in some platform). With a current price of 1.02000. When the price starts moving in a profitable direction(it triggers the TS) and hits the price of 1.02100 which is 10 pips from the first price, the first Stop Loss is set at 1.02000. As the price moves up again to 1.02200 the second stop loss is set at 1.021000 and so on. Now, when the price moves unprofitable, the TS will freeze and your Stop Loss will remain at the last highest point which in this case was the 1.02100 and the order will be closed with a profit.
when will trailing stop be disabled?
Offline or when computer goes to sleep
What are hedged orders? Full and Partial, give examples.
Hedged orders are orders that are opened in a different direction for the same instrument. Meaning you can open Buy and Sell position for the same instrument (does not have to be the same time) guaranteeing in making profit and loss. Fully hedged orders will have no margin held for partial hedged orders margin is held only for the partial order.
Example
Full hedge order:
Order Number 1 : 1 Lot BUY EURUSD
Order Number 2 : 1 Lot SELL EURUSD
Partial Hedged order:
Order number 1 : 1 Lot BUY EURUSD
Order number 2: 0.5 Lot SELL EURUSD
Will Stop Out happen if orders are fully hedged and equity equals 0 or negative?
MT4: fully hedged positions wont be close automatically, if the equity is equals to a negative then the company will have the right to close the long term positions. Applies to all servers real or demo
MT5: the orders will be set to stop out and fully hedged positions will be closed with the null compensation
Explain the types of execution
Instant execution; trades executed at clients requested price
Market execution: trades executed at whatever available price in the market
Advantage for Instant and Market execution
Instant Execution
1. Opportunity to execute an order at your requested price, good for some trading strategies
Market Execution
1. Opportunity for 100% market access
Disadvantage for Instant and Market Execution
Instant
- requotes, increase or decrease depending on the market volatility
Market
- slippage, high risk of a loss making positions when market is highly volatile.
What is a Requote?
A requote is a notification telling clients that their requested price is no longer available. They have 3 seconds to accept or reject the new price or the order will be cancelled if there is no repnse.
Which type of execution does requote occur?
instant execution
Explain the purpose of setting deviation
To avoid getting requotes, setting deviation with pips in the lower limit and upper limit in the case of price movements. By the doing so the order will move within the range that was set and client wont get a requote. Until it hits beyond the deviation set.
which type of execution allows setting deviation
Instant Execution
