what is the difference between stop and limit in forex trade?
Also what is limit..could you give me simple examples of these please
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May 28th, 2010 at 1:25 pm
[edit] Limit order
A limit order is an order to buy a security at no more, or sell at no less, than a specific price. This gives the trader some control over the price at which the trade is executed; on the other hand, the order may never be executed (“filled”).[2]
A buy limit order can only be executed by the broker at the limit price or lower. For example, if an investor wants to buy a stock, but doesn’t want to pay more than $20 for it, the investor can place a limit order to buy the stock at $20 “or better”. By entering a limit order rather than a market order, the investor will not buy the stock at a higher price, but, may not get the stock at all.
A sell limit order is analogous; it can only be executed at the limit price or higher.
A limit order to buy may never be executed if the market price surpasses the limit before the order can be filled. Because of the added complexity, some brokerages charge more for executing a limit order than they would for a market order and may make additional charges if the order goes unfulfilled.
Both buy and sell orders can be additionally constrained. Two of the most common additional constraints are Fill Or Kill (FOK) and All Or None (AON). FOK orders are either filled completely on the first attempt or canceled outright, while AON orders stipulate that the order must be completely filled or not filled at all (but still held on the order book for later execution).
A stop limit order combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or to sell) at no more (or less) than a specified price.[4] As with all limit orders, a stop-limit order doesn’t get filled if the security’s price never reaches the specified limit price.
A trailing stop order is entered with a stop parameter that creates a moving or trailing activation price, hence the name. This parameter is entered as a percentage change or actual specific amount of rise (or fall) in the security price. Trailing stop sell orders are used to maximize and protect profit as a stock’s price rises and limit losses when its price falls. Trailing stop buy orders are used to maximize profit when a stock’s price is falling and limit losses when it is rising.
May 28th, 2010 at 2:24 pm
basically stop order is a kind of order to close out your existing order before you lost to much. limit order is using for buy or sell at a better price. From my point of view these two orders are similar just the different name try to not confuse us during trading.
May 28th, 2010 at 2:33 pm
Stop = your action to close an opening position. You can stop at anytime at any price. As such, you need to monitor the fluctuation.
Limit = your action pre-setting a limit order to close an opening position at specific price. As such, the opening position will be automatically closed once the pre-set price is hit.
May 28th, 2010 at 3:05 pm
Simple to understand
It’s called Stop loss, The maximum loss you allow and take profit at the rate you thing will give enough profits.
For example If you Buy ERU/USD in a 1.4210 rate You can make stop loss at 1.4180 and take profit at 1.4290
when the rate reach any of those parameters your deal will be closed.
May 28th, 2010 at 3:12 pm
for example: now forex price is at 15,000
buy limit order at 14,000 means you want to buy the forex at 14,000 or lower.
buy stop order at 16,000 means you want to buy if the stock price touches 16,000.
May 28th, 2010 at 3:24 pm
A simple way to look at this is:
STOP – Stop orders are used to stop losses. If a trade goes against you, a stop loss will prevent you from loosing any more money than you pre-planed for.
LIMIT – Limit orders are used to take profits. If you enter a trade, and it goes your way, your position will be closed out once it hits your limit price.
EXAMPLE:
Lets say you decide to BUY EUR/USD. Your stop will be placed below your entry (incase the market goes down when you planned for it go up). You will place a limit order above your entry price so that you can capture a pre-determined amount of pips (should the market go in the direction you anticipated).
Placing stops and limits are essential. When you put on a forex trade, you will plan your trade first. You will decide when to enter, when to exit and when to stop out (if need be). This will help you minimize losses and maximize profits.