Limit Orders

With a forex limit order, you can limit the maximum price you pay when you buy a foreign currency or limit the minimum price you pay when you sell a currency. A forex limit order helps protect the trader, so that they don't buy a currency for a higher price than they are willing to pay, and so they don't sell a currency for less than what they want to get.

The difference between a forex limit order and a market order is that the limit order transaction takes place only if the forex trading currency reaches the limit you set before you bought or sold it using the forex trading platform. Even though both orders are considered immediate, as they are done one the spot market, the forex limit orders can take a longer time to execute.

Setting forex trading limit orders when buying forex trading currency -

For example, you want to buy 3 lots of the EUR/USD currency. The current bid/ask price is 1.2594 / 97. When a limit order is placed, you are essentially telling the system you want to buy the currency, buy only if the price is no higher than what you are willing to pay. You then click on the ask price and buy 3 lots of EUR/USD, with a set limit of 1.2595. This means that unless the ask price is lowered from the current 1.2597 to 1.2595 or lower, the forex trading transaction will not be executed.

Setting a limit order when selling forex currency -

If we use the previous example, a limit order on a bid price can also be made for 1.2595. This means you will sell the EUR/USD currency only if it rises to at least 1.2595.

Factors to consider when placing forex limit orders :

The currency price may not reach your trading limit orders., and so it is possible that your order may never be executed after it has been placed.

Do not become confused by the bid/ask limit setting. Keep in mind that the bid price is the price the trader is bidding to sell the currency, and the ask price is what the trader asks in order to buy the currency.

The bid price limit will always be made for the maximum amount, and if the currency fails to reach this maximum it will not be sold by the trader.

The ask price is always made for the minimum amount, and unless the currency drops to this minimum it will not be purchased by the trader.