In the Forex market, one of the tools that is particularly important for Forex trading and other financial markets is the pending order. A pending order allows traders to place an order before the price reaches a specific level they have predicted.
This tool is especially useful for those who want to find trading opportunities without the need for constant market monitoring.
In this article, we will provide a comprehensive and detailed review of pending orders, their types, how to use them, and the benefits they offer.
A pending order is a type of order that allows traders to enter the market at a specific time in the future. This type of order does not become active until the price reaches the level determined by the trader.
In simple terms, when a trader predicts that the price will reach a specific level and then reverse, they can set a pending order to buy or sell at that level. Pending orders allow traders to enter the market automatically without the need for constant monitoring. These orders are especially useful when a trader is managing multiple trades or cannot constantly track the market.
In general, a pending order enables traders to make informed decisions about the timing and price of entering or exiting a trade without being constantly present in the market.
In the Forex market, there are four main types of pending orders, each with its own unique characteristics. Understanding the differences and applications of each type can help traders implement their trading strategies more effectively. In this section, we will explore each of these types in detail.
A Buy Limit is a type of pending order used when you anticipate that the price will temporarily decrease and then reverse into an upward trend. Essentially, you place an order to buy at a price lower than the current market price. In other words, you expect the price to reach a specific level before starting its upward move.
Example: Suppose the current price of the EUR/USD pair is 1.2000, and you predict that the price will drop to 1.1950 before the upward trend begins. In this case, you can set a Buy Limit order at 1.1950.
A Sell Limit is the opposite of a Buy Limit. You use it when you anticipate that the price will rise to a level higher than the current market price and then begin to decline. You place an order to sell at a price higher than the current market price.
Example: Suppose the current price of the EUR/USD pair is 1.2000, and you predict that the price will rise to 1.2500 and then decline. In this case, you can set a Sell Limit order at 1.2500.
A Buy Stop order is used when you expect the price to break through the current level and enter into an upward trend. This type of order becomes active when the price reaches the level specified by the trader. It is typically used to enter the market after the breakout of resistance levels or other significant points.
Example: If the current price of EUR/USD is 1.2000, and you predict that if the price reaches 1.2050, an upward trend will begin, you can set a Buy Stop order at 1.2050.
A Sell Stop order is used when you expect the price to suddenly decline and enter a downward trend. In this order, the trader sets a sell order at a level lower than the current market price. This order becomes active when the price breaks through the level specified by the trader.
Example: Suppose the current price of EUR/USD is 1.2000, and you predict that if the price reaches 1.1950, a downward trend will begin. In this case, you can set a Sell Stop order at 1.1950.
Pending orders allow traders to enter the market with more precise planning. These types of orders offer numerous advantages that can enhance trading strategies. Below are some of the key benefits of using pending orders.
Pending orders enable traders to enter trades without the need for constant market monitoring. You can easily set your orders for specific times and let the system automatically execute them once the price reaches your predetermined level. This feature is especially useful for those who do not want to sit by price charts all the time.
A pending order allows you to enter the market at a specific price level, providing greater control over your trading process. For instance, if you set a Buy Limit order at a certain level, you will only enter the market once the price reaches that level, which is expected to have a higher probability of a reversal. This helps you enter the market at the most opportune point.
Pending orders are particularly useful when you're looking to minimize your trading risks. Since these orders are only activated when the price reaches your designated level, they help reduce potential risks. You can also set your stop loss and take profit levels before placing the order, ensuring that unexpected price moves do not result in large losses.
Pending orders can be used in various trading strategies, such as breakout strategies, reversal strategies, and range trading. These types of orders allow you to enter trades with greater precision and implement your strategy more effectively.
Despite all the advantages of pending orders, there are also some drawbacks that traders should consider when using this tool in the Forex market. In this section, we will discuss some of the disadvantages of pending orders.
In highly volatile markets, prices may reach your predetermined level faster than expected and then suddenly reverse direction. This could result in your order being executed at an unfavorable price.
The price may reach your specified level, but your order might not be executed due to factors such as a high spread or low market volume. This could cause you to miss trading opportunities.
If the price reaches your pending order level and then quickly reverses, you may miss the main market opportunity. This situation could reduce your profitability.
If you set multiple pending orders at the same time, the market may quickly reach different levels, causing your orders to be executed at unfavorable prices. This can lead to unexpected losses.
In brokers with high spreads, pending orders may be executed at an additional cost. This could lead to a significant difference between the actual price and your desired price.
Brokers usually set time limits for pending orders. If the market reaches the predetermined level but your order is not executed, trading opportunities may be lost.
During economic news releases or global crises, the market may experience unexpected volatility. These fluctuations could result in your order being executed at an unfavorable price or, in some cases, not executed at all.
If pending orders are not properly set with stop-loss and take-profit levels, you may be exposed to significant risks. Without proper risk management, you may use pending orders excessively, leading to losses.
MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are powerful trading platforms that traders use to enter the market and manage their trading positions. One of the most important tools in these platforms is the pending order.
A pending order allows traders to place buy or sell orders at specific prices without needing to monitor the market continuously. This tool is especially useful for long-term traders or those who do not want to be in the market at all times.
Here, we will explain, step by step, how to set a pending order in both MetaTrader 4 and MetaTrader 5:
Before anything else, you need to select the currency pair or financial instrument you want to trade.
In both MT4 and MT5, go to the Market Watch window (usually located on the left side of the platform), search for the currency pair or asset you want, and select it. For example, if you want to trade the EUR/USD pair, find and select it in the list.
After selecting the currency pair or asset, you need to open the order window to set your pending order.
The order window contains options that allow you to specify the type of order and enter its details.
In the order window, you need to select the type of pending order. From the Order Type dropdown menu, choose Pending Order. You will then be able to select one of the four different types of pending orders:
After selecting the type of pending order, you must enter your desired entry price. This price is the level at which you want the order to be executed when the market reaches it.
For example, if you set a Buy Limit, enter a price lower than the current market price where you want the price to reach and execute the buy order. If you set a Sell Stop, enter a price lower than the current market price where you expect the downtrend to begin.
Important note: At this step, make sure that the entered price aligns with your market analysis and the current market conditions. Using technical analysis and support/resistance levels can help you set the correct price.
In this step, you need to specify your trade volume. This is usually measured in lots.
In MT4 and MT5, you can enter the trade volume in the Volume section. This amount is typically divided into mini, micro, or standard lots.
For example, if you want to trade 1 standard lot of the EUR/USD pair, set the volume to 1.00.
Note: Accurate volume setting is very important, as a large volume increases your risk, while a small volume may limit your profit potential.
In the Stop Loss and Take Profit fields, you can enter the exact values for your stop loss and take profit levels. These two parameters help you prevent significant losses and set exit points for your trades with predefined profits.
Setting these tools correctly is important for risk control and trade management.
Once you've configured all the details such as price, volume, stop loss, and take profit, click on Place or OK to submit your pending order.
After placing the order, it will automatically appear in the Pending Orders list and will wait until the market price reaches your specified level to execute the trade.
After placing a pending order, you can check its status in the Terminal section (at the bottom of the platform). Here, all your pending orders are displayed, and you can edit or cancel them.
If you want to modify a pending order, simply right-click on it and select Modify Order. If you want to cancel it, right-click and choose Delete.
Pending orders are an essential tool in Forex trading, allowing traders to automate their entries based on specific price levels. By strategically placing pending orders, traders can take advantage of key market events and trends while minimizing the need for constant monitoring.
One of the most common strategies in Forex is the Breakout Strategy, which utilizes pending orders. In this strategy, you identify support and resistance levels and place pending orders at these levels. When the price reaches and breaks through one of these levels, your order is triggered, and you enter the market automatically.
In the Reversal Strategy, traders look for points where the market trend is likely to change. To achieve this, pending orders are used at support and resistance levels. When the price reaches these levels, there is a higher probability that the trend will reverse. Traders can then enter the market using a Buy Limit or Sell Limit order.
Pending orders are particularly useful for risk management. You can set these orders precisely with Stop Loss and Take Profit to prevent significant losses. Additionally, using pending orders allows you to avoid entering the market during uncertain and volatile conditions.
Pending orders are powerful trading tools that allow Forex traders to place buy or sell orders at specific price levels without the need for continuous market monitoring. These types of orders are executed when the price reaches the level set by the trader. The different types of pending orders include Buy Limit, Sell Limit, Buy Stop, and Sell Stop, each of which is used in different market conditions.
Pending orders help traders enter the market and implement their strategies automatically.
Despite their many advantages, such as saving time, offering greater control over market trends, and better risk management, pending orders also have drawbacks. Issues such as incorrect execution in volatile markets, failure to execute orders under certain market conditions, or missed trading opportunities may occur.
Therefore, using pending orders requires careful market analysis and proper risk management to avoid potential issues and to effectively take advantage of the potential of this tool.
