What is a limit order when trading forex

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Asked by
Roseanne

I want to trade forex and I came across a term called "limit order" and I don`t understand how it works. Please help a newbie :)

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Arne.Krist

"Infact the limit in the forex trading is just..."

infact the limit in the forex trading is just like the limit in the stock market trading and your broker gives you the limit which you can use to trade in stock market. for example if your current assets in the stock market is 5 lakh then the broker can give you a limit of trading for 20 lakhs on his behalf with the markup rate which he specify. that is also known as the badla trading.

This answer closely relates to:

Q. Confused understanding limit orders and stop orders in forex trading, can someone explain it to me?

"It applies to any type of trading - limit order applies to selling..."

It applies to any type of trading - Limit order applies to selling. You ask your broker to buy something below limit (like buy XXX at $5 or less rate). Stop order applies to selling. You want to stop your hold when price falls below a minimum (sell 200 of XXX if price falls below $3). Stop order is a way to minimize the losses.

This answer closely relates to:

Q. Forex brokers and limit order reliability?
are most online forex brokers like fxcm or mb trading good at hitting your limit buy and sell orders? i've read so many mixed reviews online about slippage, scalping, etc. many horror stories, but stories of success. if i have a plan that i've tested on a simulator that works, will it work with one of these brokers? (the simulator uses the same spread essentially with real historical data)

"Problems communicating between their fx trading station trade servers and their metatrader trade servers..."

I have traded both MB Trading and FXCM live and have not had significant liquidity issues with either. However, to answer your question as to whether "most online brokers" are good at "hitting your limit buy and sell orders" mainly depends on the position size your attempting to enter the market with, the time of day and currency pair your attempting to trade. And to answer your question whether your "simulator" will work with "one of these brokers" really depends on which code the simulator was created in. Is it an Expert Advisor coded for Metatrader? If so, MB Trading does not yet support the Metatrader software ( though are Rep there tells us they are working on it). MB uses the MBT Navigator which is much more difficult to create auto trading software for. FXCM recently began using Metatrader in conjunction with their FX Trading Station 2.0. Their Metatrader platform has huge drawbacks including not allowing demo accounts, not supporting multi-user accounts, and reportedly experiencing problems communicating between their FX Trading Station trade servers and their Metatrader Trade servers . I would recommend you google "Metatrader broker reviews" and find the brokers that best works for your situation.

Q. Problem with forex trading?
i am new to forex and practicing using fxcm trading platform. yesterday i bought 4 standard lots of eur/chf. the account balance at time of purchase was some 4000$.i slept at night after putting a limit order which was 15 pip higher than the value i bought.in the morning i saw the position is automatically closed giving me a loss of some $2000. i was shocked to see how the postion get closed automatically if i havent put any stop order.any explanation of this cause is appreciated.

"If the position was closed automatically without any stop or limit set..."

If the position was closed automatically without any stop or limit set, then it was most likely a margin call. If you were left with $2,000 in the account then the margin requirement for each 100k standard lot would have been $500 indicating a total margin requirement of $2,000. This leaves you with $2,000 in usable margin to guard against losses on your account. If the $2,000 goes to $0 due to losses on your EUR/CHF positions, a margin call will occur. You can verify if the trades were closed due to a margin call by running a report on your account. Goto the top of the platform, click on the Report button, and run the report for the day the trades were closed. In the Close Position section at the top of the trading report, you will see a column titled Condition. If it lists MC as the condition for the closing order, that stands for Margin Call. There's also an explanation of the margin call feature on FXCM's website here http://www.fxcm.com/execution-risks.jsp, scroll down towards the bottom of the page. If that doesn't answer it completely, I would recommend contacting client support since support available 24/7.

Q. Is there a limit to how much money you can make trading currencies (forex) ?
well, let's say you have a scalping strategy that can make you 25% per day. i know it's high but lets say you did. if you start with $2,000, the next day you should have $2,500. the next day $3125 .. right? well lets say you implement the same strategy with $5,000,000, you should be making $1,250,000 that one day. well back to my original question, is there a point where you cant make that much per day because of the size on the orders, where there wont be no one on the other side to fill your bid/ask because of it's quantity? i hear that forex is supposed to be the most liquid market of all. i know that it is extremely difficult to profit 25% per day, but hypothetically speaking. thanks.

"Becomes harder and harder to execute your orders precisely enough for the strategy to..."

i hope i am interpreting your question correctly but i think the others answering have not. if you have a theoretical scalping strategy worth 25% a day, it will not work with the higher quantities because it becomes much harder to execute a large order all at the same price and before the event occurs that will lead to the profit. it just becomes harder and harder to execute your orders precisely enough for the strategy to work which is why scalpers can do very well but they cannot be really big players. where this happens depends on your strategy. there is however no upper limit on how much you can make you just have to find the strategy and have sufficient funds to execute it properly. i hope this is clear.

Q. Finance student looking to get into forex trading, anyone have a game plan for becoming a successful trader?
i am an undergrad student with a 3.7 gpa in an finance program ranked in the top 10 nationally. i will graduate early (this december) and am also studying to take the cfa level 1 in june. i only tell you this so you know a little about my background and understand i am prepared to learn how to trade. i am not looking for a get rich quick scheme, but rather, want to study the art of trading until i can consistently make positive returns on forex during my spare time. of course, who knows, if it goes well maybe it will become my career. more than anything though, it seems really interesting and i would like to learn more. so, what books etc do i need to read to understand how to trade on forex? i understand it will take some work, but can anyone lay out a plan to follow in order to become a successful trader? for example, read x,y,x, while trading on a demo account, then open a real account and do x,y,z etc. please don't recommend trading programs like forex tracer etc! there is no way i am going to let a program control what happens to my money and, to my understanding, most all of these programs are scams. i have to go with the old adage, if it sounds too good to be true, it probably is. also, for any traders out there... what's your holding period return for a typical month and how many hours/day do you trade to generate that return? if i have limited capital to trade with, will this significantly impact my ability to utilize effective trading strategies?

You seem to be coming into this with the right mindset and congrats for that since 95% want a get rich quick scheme. I too had a high GPA from Ivy Leadue in Econ/Finance but sadly that degree doesnt translate into trading success immediately. Def dont buy any programs or such online since you have no control over them. Even if they work for a period of time you have no real idea about how to control your risk and how they are supposed to react to market conditions. 99% dont work and ALL need some understanding of risk management. For advice on trading you should learn what indicators are, such as movign averages, oscillators (like RSI) and such. You should learn common patterns that traders use and what they mean. Watch many charts, pay attention to how prices move during news anouncements and so forth. By this time you should have ideas to test in demo to see if you can make money. Try to be CONSISTENT in demo mode and try to make like an average of 100 bucks a day or some goal. Once you can consistently hit your targets and are comfortable with your system go live and try to see if it really works. These steps might need to be repeated several times until you get a profitable system you are comfortable with. Get a good low cost broker. I use Interactive Brokers. Oanda is good too, but i like IB best. Good brokers keep their spreads tight and are highly reliable. This may make the difference between profitability and losses. Good luck

Q. Forex open positions?
what usually happens if your computer temporarily loses its internet connection, or if there is a power outage? such things are not uncommon. i've heard conflicting reports over what exactly happens. for instance, would your open positions (already fulfilled trades) automatically close at whatever the current market value was, or would they stay as open positions until you logged back in? i don't really understand why open positions would reverse, because haven't they already been fulfilled in the market, regardless of what happens on the client side? what about open orders? for instance, if you've set stop or limit orders that haven't been fulfilled yet ... would these be erased if you lost your connection or power? it just seems very weird to me that open positions would simply "exit" or "close" if you were to lose your connection. for one thing, wouldn't that mean that you would need your lots re-bought or re-sold first? why in the world would it automatically exit out of the trade? i can understand a margin call, but ... secondly, what about people who are position traders and have open positions that last weeks or months? do these people keep their software, computer, and internet connections going without any interruption the entire time? brief interruptions in service or a power outage are not uncommon in our world. really don't understand it at all. specifically, i'm using mb trading's navigator, but what tripped me is that they said "trailing stops are server-sided and protected from disconnects," which to me implies that other types of entry orders are client-sided and are not protected from disconnects? i really hope i'm misinterpreting something. the thing is, if i end up with a margin call because my connection or power was out too long, then that is one thing. but an open trade automatically exiting out into a closed trade simply because you lost connection or power briefly makes absolutely no sense to me. i don't understand why a fulfilled trade would even do that.

"Computers which grabbed all the orders from your little pc just before..."

"trailing stops are server-sided and protected from disconnects," There's your answer right there straight from the horse's mouth. The server is their(trading company) computers which grabbed all the orders from your little PC just before it died so it will execute those instructions like a lawyer executes a will. Once their servers get a record of what you want to do then you no longer have to be sitting on the edge of your seat worrying about whether the order will go through or not, it's in their hands then. The only time you actually need your little PC to connect to their servers is for UPDATES or ECHANGES of info at any time. In other words if you want to CHANGE your orders or instructions. Or of course if you want an update on the ticker prices. No, you little PC doesn't need to stay plugged into the matrix at all. You can set it and forget it as long as your orders are stored server side.

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