Tuesday, January 17, 2012

Trading Topic: Placing Orders In Metatrader

This article covers how to set a stop loss in metatrader, how to set a target price, how to set buy limit, and how to set a sell limit.

This is an often overlooked topic. The brokers are quick to sign you up to trade FOREX but they often won't teach you how to correctly place an automated order. It's easy to click buy or sell from the trading terminal but what if you want to place a stop loss or target price that triggers at a specific price? It sounds simple at first glance but choosing the wrong order type can yield undesirable results.

You wouldn't want to make any type of mistake with real money involved so learn the difference between order types.

Orders that occur at a different price are called Pending Orders.

Types of Pending Orders:
Buy Limit - A buy limit is placed at a price that is lower than the current price. If that price is met an order will be sent at the market price.
Sell Limit - A sell limit is placed at a price that is higher than the current price. If that price is met an order will be sent at the market price.
Buy Stop - Buy Stops are used by momentum traders above the current price.
Sell Stop - Sell Stops are used by momentum traders below the current price.
Stop Loss - A stop loss is a price that is so many pips in the opposite direction of your trade if your trade fails to meet it's objective. Stop losses are meant to protect equity / further destruction of trading account. Traders that don't use them often blow up their accounts especially if their account is small.
Take Profit - A take profit is a price that is so many pips in the direction of your trade if the trade is successful.
Trailing Stop - A trailing stop price is adjusted as the price fluctuates to capture maximum profit if the trader gets in a good trend. Not useful in a range.

Example of trade in Metatrader (practice in demo):
1. Right click on chart and select "Trading" and "New Order".
2. Under "Type" the first choice is "Instant Execution". We want to change that
to "Pending Order".
3. Now Pending Order Will be under Type at the top and just below it will be a Pending Order section. There will also be a "Type" here with choices of Buy Limit, Sell Limit, Sell Stop, and Buy Stop.
4. Select a Buy limit below the current price by about 20 pips and select a Sell Limit of about 20 pips from current price by changing the "at price". The "at price" will have up and down arrows so for buy click 20 times down and 20 times up for sell. You will then see horizontal levels across the chart for each pending order you made once you click ok. There will be a ticket number to the left of the horizontal level and the type of order. eg some number like #3252646 sell limit. #434266 buy limit.
5. When the price goes to the sell limit or buy limit price a real order will be filled. While it says buy limit or sell limit it is still pending and no actual trade has been made. If the trade hasn't been triggered you can go into terminal (View/Terminal or Ctrl+t) select Trade in the terminal to make changes to the order. Right click on the trade and select "Modify or Delete Order" You change the price the same way you set it with the up down arrows where price is. To delete the order select "Delete". Practice deleting and changing orders a few times - in live markets this might save you some money if you had made a mistake and have to act fast before the trade is triggered.
6. Once the target prices of the pending orders have been filled "sell limit" horizontal line will change to "sell" and "buy limit" will change to "buy" meaning these orders are open.

That's basically it for buy and sell limits. Now what if you want to close those orders?

You can always manually right click on the order and choose close order. Or:

Exercise: Make pending orders for a stop loss and target price as 20 pips profit or loss:
1. right click order and select "Modify or Delete Order" again. The only choice will be to "Modify Order".

2. Select "Copy as" to change both Stop Loss and Take Profit and adjust the price accordingly (20pips difference) then click modify. If done properly red lines will show up on the chart for you stop loss and target. *Both these prices must differ by a specific amount from the current price - on my broker is 5 pips.


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