Order Types

Traders interested in becoming part of the Online Trading boom have already become familiar with the various order types available regarding FX trading. As a trader you need to know exactly what kind of order type you are looking for and how well it suits your strategy.

MTNFX works round the clock in offering the best trading conditions and best programs you can find anywhere in the market which is no surprise that the MTNFX Order Types are no exception to our rule.

Market Order

Market Order is what you call a buy/sell order at the current market price. This type of order can be used to enter or exit a trade.

Market orders are the ones traders need to always look over due to the unexpected volatility of some markets. For instance, there may be a difference between the price seen at the order time and the actual price of the transaction. This is due to slippage – the difference between the expected price of a trade, and the price the trade actually executes at. Slippage results in either losses or gain of several pips.

Limit Order

An order to buy or sell at a certain limit. Limit orders can be used to buy a currency below the market price or sell a currency above the market price.

When buying, your order is executed at a time when the market falls to your limit order price. When selling, your order is executed at a time when the market rises to your limit order price. There is no slippage with limit orders.

Stop Order

An order by which you buy above the market price or sell below the market price. They are most commonly used as stop-loss orders to limit losses if the market moves contrary to what the trader had expected.

A stop-loss order will sell the currency if the market falls below the point set by the trader.

OCO Order

The One Cancels the Other (OCO) order is used when placing a limit order and a stop-loss order simultaneously. If one of the orders has been executed, the other is automatically cancelled, allowing the trader to perform a transaction without monitoring the market.

If the market falls, the stop-loss order will be executed, but if the market rises to the level of the limit order, the currency will be sold at a profit.

Examples of an OCO Transaction

  • Buy: 1 standard lot EUR/USD @ 1.3228 = $132,280
  • Pip Value: 1 pip = $10
  • Stop-Loss: 1.3203
  • Limit: 1.3328

This is an order to buy US dollars at 1.3328 and to sell them if they fall to 1.3203 (resulting in a loss of 25 pips or $250) or to sell them if they rise to 1.3328 (resulting in a profit of 100 pips or $1,000).

  • Buy USD: 1 standard lot USD/CDN @ 1.2157 = $121,570 CDN
  • Pip Value: 1 pip = $10
  • Stop-Loss: 1.2147
  • Margin: $1,000 (1%)

The current bid/ask price for US dollars and Canadian dollars is USD/CDN 1.2152/57 meaning you can buy $1 US for 1.2152 CDN or sell 1.2157 CDN for $1 US.

If you thought that the US dollar (USD) was undervalued against the Canadian dollar (CDN) then you would buy USD (simultaneously selling CDN) and wait for the US dollar to rise. You are buying US$100,000 and selling CDN $121,570. Your stop loss order will be executed if the dollar falls below 1.2147, in which case you will lose $100.

However, in our example the USD/CDN rises to 1.2192/87. You can now sell $1 US for 1.2192 CDN or sell 1.2187 CDN for $1 US. Because you entered the transaction by buying US dollars (buying long), you should now sell US dollars and buy back CDN dollars to realize your profit.

You sell US$100,000 at the current USD/CDN rate of 1.2192, and receive $CDN 121,920 for which you originally paid CDN $121,570. Your profit is $350 Canadian dollars or US$ 287.19 (350 divided by the current exchange rate of 1.2187)