Pending orders are important tools in the world of financial trading that allow traders to buy or sell based on specific criteria and predetermined prices. These types of orders are executed automatically when the price reaches the desired level, enabling traders to manage their trades without the need for constant and continuous monitoring of the market.
Types of Pending Orders in Forex
Pending orders come in various types, each of which can play an important role in trading strategies:
Limit Order
A limit order is a type of trading order that allows traders to buy or sell a currency by specifying a particular price. This type of order is divided into two main categories:
Buy Limit
This order is set to purchase a currency at a price lower than the current market price. It is used when a trader anticipates that the currency’s price will decrease and then subsequently increase. For example, suppose the EUR/USD pair is currently priced at 1.2000, and you expect this price to drop to 1.1950 and then rise. In this case, you can set a buy limit at 1.1950 so that your purchase is executed when the price reaches this level.
Sell Limit
This order is set to sell a currency at a price higher than the current market price. It is used when a trader believes that the currency’s price will increase and then experience a downward trend. For example, if the GBP/USD pair is currently at 1.3000 and you predict that the price will rise to 1.3100 before decreasing, you can set a sell limit at 1.3100 so that your sale is executed when the price reaches this level.
Stop Order
A stop order is a type of trading order that becomes active once the price reaches a specified level and is then converted into a market order. This category of orders is divided into two main types:
Buy Stop
This means buying at a price higher than the current market price. It is used when a trader anticipates that the currency’s price will increase after breaking through a specific resistance level. For example, if the EUR/USD rate is currently 1.2000 and you believe that once it surpasses 1.2050, the market trend will become bullish, you can set a buy stop at 1.2050.
Sell Stop
This is an order to sell a currency at a price lower than the current market price. It is used when a trader expects that the currency’s price will move downward after reaching a particular support level. For example, if the GBP/USD rate is currently 1.3000 and you predict that reaching 1.2950 will initiate a bearish market trend, you can set a sell stop at 1.2950.
Advantages and Disadvantages of Pending Orders in Forex Trading
Using pending orders in Forex trading has both benefits and drawbacks. Understanding these can significantly enhance trading strategies.
Advantages
1. Time Efficiency
With pending orders, traders no longer need to monitor market fluctuations constantly. Transactions are executed automatically at the specified time and price. For instance, a trader who is occupied during working hours can set pending orders to engage with the market during their inactive periods.
2. Precise Entry and Exit Points
Pending orders enable traders to specify their entry and exit points accurately based on technical and fundamental analysis. For example, a trader can set a buy limit near a strong support level to ensure they enter the trade at the optimal time.
3. Risk Management
By accurately defining stop-loss and take-profit levels, traders can manage their risks effectively. For instance, setting a stop-loss a certain distance from the entry price can prevent significant losses.
4. Exploiting Market Volatility
Pending orders allow traders to react swiftly to market volatility and capitalize on available opportunities without being present at their trading terminals.
5. Avoiding Emotional Decisions
With pending orders, traders eliminate emotional decision-making. This system ensures that trades are executed based on logical planning rather than emotions, reducing the likelihood of hasty decisions during significant market fluctuations.
Disadvantages
1. Missed Opportunities
In highly volatile markets, pending orders might not get triggered if the price moves too quickly or does not reach the specified level, causing traders to miss potential opportunities.
2. Lack of Flexibility
Once set, pending orders may not adapt to rapidly changing market conditions unless manually adjusted, which can limit a trader’s ability to respond dynamically.
3. Slippage Risk
In fast-moving markets, there is a risk of slippage where the order is executed at a price different from the one specified, particularly during significant news events.
4. Over-Reliance on Automation
Excessive reliance on pending orders can lead traders to ignore broader market developments or fail to adjust their strategies as needed.
5. Requires Accurate Analysis
Pending orders depend heavily on the trader’s ability to predict market movements accurately. Incorrect analysis can lead to suboptimal entries and exits, increasing the risk of losses. By weighing these advantages and disadvantages, traders can decide how to integrate pending orders into their trading strategies effectively.
Disadvantages
- Risk of Non-Execution of Orders:
If the price does not reach the specified level, the pending order will not be triggered, potentially causing the trader to miss profitable opportunities. - Price Slippage:
In highly volatile market conditions, the price may move quickly past the specified level, resulting in execution at a different price. For instance, if a stop order is set at 1.2950 for GBP/USD, but due to volatility, the order may execute at 1.2940 instead. - Complexity in Setting Orders:
For novice traders, configuring multiple and complex pending orders can be challenging, increasing the likelihood of errors in the settings. - Requirement for Precise Market Analysis:
To determine optimal entry and exit points, traders must conduct thorough technical and fundamental analyses. Mistakes in these analyses can lead to improperly set pending orders. For example, incorrectly identifying support and resistance levels may result in poorly executed orders. - Additional Costs:
Some brokers may charge extra fees for setting up pending orders, which can negatively impact the profitability of trades.
Comprehensive Guide to Placing Pending Orders in Metatrader
Below is a detailed, step-by-step guide on how to place pending orders in MetaTrader:
1. Opening the New Order Window in MetaTrader
- In the Market Watch window, right-click on the symbol of the desired asset and select “New Order”.
- Alternatively, navigate to File > New Order from the top menu.
2. Initial Setup for the Pending Order
After the New Order window opens, configure the initial settings for your order:
- Symbol: Select the desired trading symbol from the list.
- Volume: Enter the trade volume in lots. The volume should align with your account size and risk management strategy.
- Order Type: From the dropdown list, select the desired order type. Pending order types include:
- Buy Limit: Buying when the price drops to a specified level.
- Sell Limit: Selling when the price rises to a specified level.
- Buy Stop: Buying when the price rises to a specified level.
- Sell Stop: Selling when the price drops to a specified level.
3. Setting the Execution Price for the Pending Order
Depending on the order type, specify the price at which the order should be executed:
- Buy Limit: Price must be below the current market price.
- Sell Limit: Price must be above the current market price.
- Buy Stop: Price must be above the current market price.
- Sell Stop: Price must be below the current market price.
To enter the price:
- Use the relevant text box, or
- Directly click on the chart to select the desired price.
4. Configuring Stop Loss and Take Profit (Optional)
To manage risk and set profit targets, you can configure the following:
- Stop Loss: A price level where the order will automatically close to limit losses.
- Take Profit: A price level where the order will automatically close to secure profits.
5. Setting Expiration Time
Pending orders can remain valid until a specific time or until manually canceled:
- Good Till Canceled (GTC): The order remains active until canceled by the trader.
- Good Till Date (GTD): The order remains valid until a specified date and time, after which it is automatically canceled.
6. Adding Comments (Optional)
In the Comment section, you can add notes or details about the order. This helps in managing and tracking orders efficiently in the future.
7. Reviewing and Confirming the Pending Order
After completing all the settings, carefully review the entered information to ensure accuracy. Then, click “Place” or “OK” to send the order to the trading server.
8. Managing Pending Orders in MetaTrader
Once placed, you can manage your pending orders via the Terminal window under the Trade tab. Here, you can:
- Modify, cancel, or adjust orders.
- View all pending orders in the Pending Orders tab.
9. Placing Pending Orders Directly from the Chart
MetaTrader also allows placing pending orders directly from the chart:
- Right-Click on the Chart: Right-click at the desired location and select Trading > New Pending Order.
- Select Order Type: Choose the type of pending order you wish to place.
- Set the Price: Click on the chart to select the execution price.
- Additional Settings: Configure Stop Loss, Take Profit, and expiration time.
- Confirm the Order: Review the settings and place the order.
Reasons for Pending Order (Pending Order) Non-Execution in Metatrader
Below is a comprehensive and SEO-friendly list of reasons why pending orders might not execute in MetaTrader:
1. Market Price Not Reaching the Specified Level
Pending orders are only triggered when the market price reaches the specified level:
- Buy Limit: Market price remains above the specified level.
- Sell Limit: Market price remains below the specified level.
- Buy Stop and Sell Stop: Market price has not yet crossed the specified level.
2. Spread Not Covered
The execution of pending orders depends on the spread (difference between Bid and Ask prices):
- Buy Limit and Buy Stop: The Ask price must reach the specified level.
- Sell Limit and Sell Stop: The Bid price must reach the specified level.
3. Order Expiration (Expiration)
If an expiration time is set for the pending order, and the market price does not reach the specified level before that time, the order will be canceled.
4. Incorrect Stop Loss and Take Profit Settings
- Stop Loss and Take Profit levels set too close to the order price.
- Levels set outside the broker’s permitted range.
5. Rapid Market Volatility (Slippage)
In highly volatile markets, the price may move quickly past the specified level, causing the order to remain unexecuted.
6. Platform or Broker Limitations
- Minimum Distance: The order does not meet the broker’s minimum price distance requirements.
- Inactive Trading Hours: The symbol is unavailable for trading during certain hours.
7. User Error
- Incorrect price entry.
- Selecting the wrong order type (e.g., Buy Limit instead of Buy Stop).
- Improper expiration date settings.
8. Market Closure
Orders placed during market closure or outside trading hours will be delayed until the market reopens.
9. Insufficient Account Margin (Free Margin)
If the account lacks sufficient margin to cover the trade size, the pending order will not execute.