Market orders are placed live at market, which means you will decide the enter the trade manually. Intraday traders and in particular scalpers are likely to use market orders to enter the market.
These are orders placed that will become active trades if price crosses a specified price level. These are useful if you are an EOD (End of Day) Trader who will not be in front of the screens to monitor price. They’re also ideal to trade ‘breakouts’ (meaning when price moves out of a trading range) or for trading pullbacks. Pending orders come in two varieties:
1. Stop orders, which are orders to sell below the current price or orders to buy above the current price;
2. Limit orders, which are the inverse of stop orders: orders to sell above the current price, or buy below the current price
STOP ORDERS ILLUSTRATED
The chart below illustrates buy stop orders (buying at a higher price) and sell stop orders (selling at a lower price). These orders can be used to cap losses; for instance, you can place a sell stop order to close out a buy order you placed earlier, and thus limit your potential losses. Alternatively, stop orders can be used as part of momentum strategies (for instance, if you want to initiate a sell order, but only after price has begun gaining downward momentum).
The chart below illustrates buy limit orders (buying at a lower price) as well as sell limit orders (selling at a higher price). These orders are useful for customers who wish to sell an asset they bought previously at a higher price, thus locking in a profit, or to buy automatically if price falls.
Stops and limits can be particularly useful for customers who wish to carefully control their risk exposure. See the ThinkForex trading guides for advanced strategies on using stops and limits.