Stop Orders and Limit Orders: Understanding the Different Types of Orders

There are a couple of ways that you can do to manage your trades even without keeping an eye on it 24/7. These methods are also very helpful in preventing loss, in case your trades go against you. There are two types of orders that you need to use in CFD trading – stop order and limit order.

Both of these orders help in managing your trades even if you are away for a while. But which of these orders should you use? Check out this information below.

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What is an Order?

It is an instruction made by the trader to close or open a trade. The trader will give the order to their provider which in turn executes the order on your behalf. This move will help you save time and a very effective guard on your profits.

Meanwhile, an order level is a price that the trader wants to enter or exit the market. It triggers to move, to enter or exit, a trade if a certain price is reached.

Entry Orders and Closing Orders

There are two types of orders – entry and closing order. A closing order will be closed once the market reaches a specific level. While entry order will open a trade once the underlying asset reaches a certain level. Without having to monitor the market all the time, entry orders can be used to enter a trade whenever a certain level is reached. As for closing orders, your profits will be locked once your prediction goes wrong.

Stop Orders and Limit Orders

Stop Orders is generally very useful especially for traders who also have corporate jobs other than trading. With a set of instructions given by the trader, the trade automatically stops to prevent further loss when the current price becomes less favorable on your side.

As for the limit order, it is an instruction given by the trader to trade whenever the market price becomes more favorable.

Both of these tools are very useful to any trader, there’s no reason not to use these two together. There are already a lot of platforms that use both these two orders to limit the losses incurred.

What is the Limit Orders?

A limit order can be used to close and open trades. With a limit order, you can enter a trader whenever the market encounters a favorable price compared to the current price. As for long positions, this is enabled if the price level is below the current price level while above the price level if a short position is opened. Generally speaking, you use limit orders if you know the price of the underlying asset that you want to have.

What are Stop Orders?

Stop Orders are used to close a position if a certain level of fluctuation hits the market. This is generally good to avoid incurring losses even while you are away. For the same reason, it also opens a position when a good opportunity to trade comes. If you want to buy an asset, you should place the stop order below your current level but if you want to sell, you should place it above.

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