A limit order is a market order. The limit order has special instructions which prevents it from being executed until the market price gets to the price you had chosen when creating the order. If all conditions are met, the limit order should help to cut down the amount of risk you could face if you enter into a fluctuating market in which the exchange rate could move against you suddenly.
In the forex, the limit order is used as a risk management tool to sell or buy at a particular price or a better one.
This way, Limit orders are most times used to lock in gains. Take me for a trader in a long position, I will use sell limit order which is placed above the current price, so that I can sell at price I have chosen or even higher. In the case where I am a trader holding a short position, I will place a buy limit order below the price to buy at my chosen price or lower.
We as traders also have the option of using Limit orders to open a short or long position at a particular price or an improved one. We could use an entry limit buy to buy a currency pair at a desired price or a lower one and then use an entry limit sell to enter a short position at a chosen price or a higher one.
For instance say the AUD/USD at present has a market price of 1.0937 / 1.0939. Now I think that when AUD/USD gets to1.0965, the Australian dollar will drop in value relative to the US dollar. As a result of this, I will enter into a Sell position when the price touches this level instead of trading at the current price. I will then place a Limit Entry Order to sell AUD10,000 on AUD/USD once the price gets to 1.0965. Because of this, when the ‘bid’ of AUD/USD gets to 1.0965, the order will then be triggered. Another Sell trade of AUD10,00 AUD/USD will be at once opened. I must admit that the limt orders have saved traders from thousand of dollars losses.
In the forex, the limit order is used as a risk management tool to sell or buy at a particular price or a better one.
This way, Limit orders are most times used to lock in gains. Take me for a trader in a long position, I will use sell limit order which is placed above the current price, so that I can sell at price I have chosen or even higher. In the case where I am a trader holding a short position, I will place a buy limit order below the price to buy at my chosen price or lower.
We as traders also have the option of using Limit orders to open a short or long position at a particular price or an improved one. We could use an entry limit buy to buy a currency pair at a desired price or a lower one and then use an entry limit sell to enter a short position at a chosen price or a higher one.
For instance say the AUD/USD at present has a market price of 1.0937 / 1.0939. Now I think that when AUD/USD gets to1.0965, the Australian dollar will drop in value relative to the US dollar. As a result of this, I will enter into a Sell position when the price touches this level instead of trading at the current price. I will then place a Limit Entry Order to sell AUD10,000 on AUD/USD once the price gets to 1.0965. Because of this, when the ‘bid’ of AUD/USD gets to 1.0965, the order will then be triggered. Another Sell trade of AUD10,00 AUD/USD will be at once opened. I must admit that the limt orders have saved traders from thousand of dollars losses.
