The pending order strategy
The pending order strategy has gained big
popularity among Forex traders. This situation was caused by the high
efficiency of such work tactic, which allows to reduce the psychological
pressure on the market participant and to open profitable positions in
the situation of the sharp price changing. With the help of this
strategy, the profitability from the Forex trading can increase in
multiple times. It can be used by newbies, as well as by the
professionals in order to increase the trading efficiency.
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Location of the indicator in the terminal |
To use this strategy correctly in your work, you should determine the
price, which would cause the order execution, options of the stop loss
and take profit orders and the order period of existence.
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Types of pending orders |
So, pending order strategy is based on the fulfillment of the following actions:
- Determination of the entry points. There are several ways of
determination. One way is to determine the basis entry points. For this,
trader has to spot important price minimums and maximums, upon reaching
which, the trend most probably will continue its motion.
If the price for some time moves in one price channel, another way can
be used. Trader can set the order parameters with the expectation of the
breakdown of the support or resistance line will take place.
Also it’s possible to use the way of placing buy limit and sell limit
orders. They are being placed with the expectation that the price will
come to the certain point, wherein for the buy limit the price will be
lower than the current one, and for sell limit – higher, and will turn
in the direction of the current trend. For the pending orders buy stop,
it is expected that the price will continue to move in the bull trend,
meaning that the price will increase. For sell stop everything is vice
versa, the price has to continue moving in the bear trend and to
decrease more towards the level, on which the order is being placed.
The next way is the use of the news. Trader has to know in advance the
time of the important news release and to place the order higher or
lower comparing to the current price. Upon the confirmation of the news,
trend will continue the movement, otherwise the reversal will take
place. In any case, the order executions will take place.
- Placing the stop loss order. This order is placed in accordance
with trader's trading strategy and money management. All the advantages
and disadvantages can be read in the article “Stop Loss”.
- Placing the take profit order. The parameter of it depends on the
ambitions of the trader and the current market situation on the certain
currency pair. You should estimate the size of possible profit and the
probability of the trend reversal.
- Order term of existence. This aspect of the described strategy is
very important. You have to define the term of its expiration to make
the pending order execute at the parameters, set by the trader.
Otherwise, the order can be executed not at the trader's trading
strategy.
Considering similar nuances, it is possible to learn how to use the
pending order strategy effectively and to increase the results of the
Forex trading.