In our last lesson we learned how to place stop loss and take profit orders which allow us the freedom to step away from the computer and have our exit orders automatically execute should the market reach one of our targets. In today’s lesson we are going to continue our free forex trading course with a look at entry orders.
Where the stop loss and take profit orders automatically execute to take you out of an existing position when the market reaches a certain level, the entry order automatically executes to open a new position.
To help understand what I am talking about lets log into our free real time demo accounts and place a couple more orders. If you have not done so already, I encourage you to pause this video now and click the link above this video if you are watching on InformedTrades.com or to the right of this video if you are watching on YouTube, and register for a free real time demo account so you can follow along as well.
For this example lets say that my analysis tells me if the EUR/JPY reaches 164.50 then this would be a good level to sell. I do not however want to sit in front of my computer and wait for the market to reach that level however. Luckily this and most other electronic platforms will allow you to place what is called an Entry order on this particular platform, which will open a trade for you only if the specified rate in the market is hit.
To the right of the dealing rates window you will see a window labeled "orders". Right click anywhere in this window which will bring up a gray drop down menu. In this menu you should see an option to "create an entry order". Select that option by left clicking, which will bring up the entry order box.
Change the currency pair that you wish to trade to EUR/JPY, make sure the sell option is selected, and then change the rate in the rate line to 164.50.
Once you do this click ok and you will see that order move into the orders window with the word "waiting" in the status column. As you can see you now have an order to sell 1 contract of EUR/JPY if the sell rate in the market touches 164.50.
Now this is a nice feature that will allow you to enter the market if you are away from your computer and a level you have been watching is reached, but as it is set up now that position will be completely unprotected after entry, and we have not determined how to close the position if it hits our profit target.
If you notice in the order window however there is both a stop and a limit column just as there is in the open positions window. This allows us to enter both a stop loss and take profit order on this pending order. The difference between these stop loss and take profit orders and a normal stop loss or take profit order, is that these are what are known as "if done orders". What this means is that the stop loss and take profit order will only become active “if” the entry order price is hit. If that price is not hit then nothing happens with these orders. If the entry order price is hit then you will see that position move from the entry order window into the open positions window, and the stop loss and take profit order will then be active there.
For your homework assignment tonight I encourage you to analyze the market using the techniques we learned in our free basics of trading course and then place a few entry orders using the technique we just learned here. If you would like to share your trades with the InformedTrades.com community I am sure we would all love to see them, so please feel free to post them in the comments section of this lesson on InformedTrades.com.
That’s our lesson for today. In our next lesson we are look at something which is known as rollover and how you either earn or pay money for holding positions over night so we hope to see you in that lesson.
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