Advanced Order Types: Limit & Stop Orders

Advanced Order Types are basic but vital tools that should be considered when executing an FX strategy. Each Advanced Order Type has its own advantages; however, they generally help protect profits and limit downside risk. Understanding the differences and benefits of each Advanced Order Type is essential to help you determine which strategy will help you reach your goals.

What is a Limit Order?

A Limit Order is an order to buy or sell currency at a specific rate. Limit Orders are not guaranteed to execute if the rate does not reach the specified target rate before the expiry date.

Benefits:

• They have the advantage of being able to specify a precise execution price
• Set Buy Limit below current market rate because you believe the market will go down to your limit price
• Set Sell Limit above current market rate because you believe the market will go up to your limit price

What is a Stop Order?

A Stop Order is also referred to as a Stop-Loss Order. It is an order to buy or sell currency once the price of that currency reaches a specified level called the stop price. A Buy Stop Order is placed above the market and a Sell Stop Order below the market. Stop Orders are not guaranteed to execute if triggered, especially in illiquid and/or exotic currencies.

Benefits:

• They are used to protect a profit or loss
• Set Buy Stop above current market rate to set the maximum rate you are willing to pay
• Set Sell Stop below current market rate to set the minimum rate you want to sell at

Expirations of Orders

• Good till Date (GTD): An order that has a specific expiration date. The order will expire on that date if it has not filled.
• Good till Cancelled (GTC): An order that has no expiration date. The order remains active until filled or cancelled.

FX Risk Management Strategies

Managing risk is a vital part of your business. Advanced Order Types can be combined with other foreign exchange hedging solutions to protect your profits, limit downside risk, and are found especially useful with market volatility and with trending currency pairs.
Our dedicated Account Managers will work with you to assess your current risks, safeguard your profits, and ensure your financial stability, so you can operate with confidence.
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