Mastering Pending Orders in Forex Trading
Do you often use technical analysis in your trading strategy? If you’re like many Malaysian traders, you might appreciate the precision it offers but struggle with the time commitment required. Being glued to your trading screen isn’t feasible for everyone, and that’s where pending orders come into play. They are the tools that allow you to automate your trades, ensuring you never miss an opportunity, even when you’re not actively watching the market.
This guide, prepared by the JustMarkets team, introduces you to the art of setting and managing pending orders, offering you a way to stay engaged in trading without sacrificing your time elsewhere.
What Are Pending Orders?
Pending orders allow Forex traders to set specific conditions for entering or exiting trades without executing transactions manually.
These orders are instructions to automatically buy or sell a currency pair when its price is predetermined. This automation is crucial for traders who cannot monitor the markets around the clock but still want to capitalize on potential opportunities that align with their trading strategies.
Types of Pending Orders
Pending orders can be broadly categorized into two types: Stop orders and Limit orders. Each type has a specific purpose and is used based on the trader’s anticipation of future price movements:
Stop Orders
These are used to buy or sell a currency pair at a worse price than the current market rate. For example:
- Buy Stop: Placed above the current market price. If you believe the price will rise after reaching a certain point, you set a Buy Stop to enter the market on the momentum of the expected upward trend.
- Sell Stop: Set below the current market price. This order is used when you anticipate that the price will continue to fall after it drops to your specified level, allowing you to enter or exit a trade during a downward movement.
Limit Orders
These orders are executed at a more favorable price than the current market level. For instance:
- Buy Limit: Placed below the current market price. Use this if you expect the price to rebound upwards after dropping to a certain level, allowing you to purchase at a lower price before an anticipated increase.
- Sell Limit: Set above the current market price. This is ideal if you predict that the price will reverse lower after reaching a higher level, enabling you to sell at a peak before a potential decline.
Visual examples often make understanding the practical application of pending orders much clearer.
Let’s break down each type with a scenario that illustrates how and why these orders are set:
If the price is currently going up and you anticipate it will continue after reaching a certain point. Then, place a Buy Stop above the current price to buy automatically as the price continues to rise.
If the price is dropping but you expect it to rise again after hitting a lower point. Then, set a Buy Limit below the current price to buy automatically at a lower price before it rises.
If the price is falling and you expect it to keep falling after passing a certain point. Then, place a Sell Stop below the current price to sell automatically as the price continues to drop.
If the price is rising but you expect it to fall again after reaching a higher point. Then, set a Sell Limit above the current price to sell automatically at a higher price before it falls.
How to Place Pending Orders in MT4
MetaTrader 4 is the most convenient trading terminal used by many traders around the world especially in Malaysia. Before proceeding you may want to read our guides on downloading and installing MT4 on your device. Done? Okay, let’s move on.
When trading with MT4, setting up pending orders allows you to automate your trades based on specific market conditions. Here’s a straightforward guide on how to place pending orders in the MT4 platform:
Step 1. Open the Order Window
Access the “New Order” window through various means: the toolbar, the context menu, the “Market Watch” window, directly from the chart, or by pressing F9 on your keyboard.
Step 2. Configure the Order
Once the “Order” window is open, select your desired currency pair and specify the volume of your trade. Choose the ‘Type’ of pending order you want to place (e.g., Buy Stop, Sell Stop, Buy Limit, Sell Limit).
In the ‘At price’ field, enter the price at which you want the trade to execute.
Step 3. Set Expiry
Optionally, you can set an ‘Expiry’ for your pending order. This is the date and time when the order will expire if not triggered by then. Setting an expiry is useful for short-term strategies where you don’t want the order to remain active indefinitely.
Step 4. Add Stop Loss and Take Profit Levels:
While setting up your pending order, you can also specify Stop Loss and Take Profit levels to manage your risk and secure profits automatically.
Step 5. Place the Order
After ensuring all details are correct, click on “Place” to set your pending order.
Step 6. Monitor and Modify Orders:
Your pending order will now appear in the ‘Trade’ tab of the terminal. Here, you can monitor its status, and if necessary, modify or delete it by right-clicking on the order and selecting ‘Modify or Delete Order’.
How to Modify Pending Orders?
Let’s imagine that some time has passed and you thought it would be a good idea to change the terms of your order. That’s okay. Let’s find out how to do it.
Important: you can modify or delete the pending order until it is not activated.
- Navigate to the “Trade” tab in the terminal. Right-click on the pending order you wish to modify and select “Modify or Delete Order” from the context menu.
- In the order management window, you can change parameters such as the entry price, Stop Loss, and Take Profit levels. Adjust these according to your new strategy or market analysis.
- After setting the new parameters, click on “Modify” to apply the changes. The system will update your order with the new settings.
How to Delete Pending Orders?
Now you’ve changed your mind completely. And changing the order price is not an option. You have to delete it. Okay, follow the instructions:
- Follow the same steps to access the modify window for the order.
- Instead of modifying, click the “Delete” button to remove the order from your list. This action cancels the order and removes any associated trade risks.
In addition, the pending order can be deleted with just a click. To do this find the appropriate order in the “Trade” tab and click on the x in the “Profit” column.
How to Manage Pending Orders Directly From the Chart?
To manage orders directly from the chart, ensure that “Show trade levels” is enabled in your platform settings. Go to Tools → Options → Charts and check “Show trade levels.”
Click on the order line displayed on the chart and drag it to the desired price level. This method can be used to quickly adjust the entry price or Stop Loss and Take Profit levels.
If “One-Click Trading” is turned off, a confirmation window will appear after you release the mouse button, allowing you to review and confirm the changes. If it is on, changes apply immediately without further confirmation.
Some Tips on Using Pending Orders
Using pending orders effectively requires a blend of strategy and practical understanding of market behavior. Here are some best practices to consider:
- Always consider the overall market conditions when placing pending orders. For volatile markets, adjust your order settings to accommodate larger price swings to avoid premature execution or stop-outs.
- Anticipate Slippage. Especially in fast-moving markets, slippage can occur. Slippage is when an order is executed at a different price than expected. Account for this possibility by setting a range of acceptable prices for entry or exit, rather than a single price point.
- Risk Management is crucial. Always set Stop Loss and Take Profit levels to manage your exposure. Remember, effective risk management preserves your trading capital for future opportunities.
Pending orders are very popular among Malaysian traders according to our practice, so do not be afraid to use these best practices to harness their full potential.
Time to Trade!
Mastering pending orders is a vital skill in Forex trading, enhancing your ability to capitalize on market opportunities without needing to constantly monitor price movements.
We strongly encourage all traders, particularly those new to Forex, to practice setting and managing pending orders on a demo account. This practice environment is invaluable for developing competence and confidence before transitioning to real funds. By integrating the tips shared in this guide, you can refine your approach to Forex trading, making use of pending orders to execute your strategies efficiently and effectively. Remember, every successful trader was once a beginner, and mastery comes with practice and patience.
