Stop Loss orders

Traders should always place trades with a Stop Loss Order. This is the price where your position will automatically liquidate should the trade go against your favor. Your Stop Loss is your ‘worst case’ scenario which allows you to minimize your exposure to massive losses.
The two types of Stop Orders are Sell Stops and Buy Stops; sell stops are normally filled at the bid whereas the buy stops are filled on the offer. Traders should check that sell stops aren’t closed out at the offer and vice versa with the buy stops on the bid. Should the market gap over the stop the position will be filled at the best price on offer.

Limit Orders

A trader would use this order to sell out their position once it reached a certain price level. For example if a trader was long in the GBP/USD entering at 1.7750 they may place a limit order to automatically close out the position at 1.7800, capturing 50 pips of profit. This is a wonderful tool to utilize so you do not need to sit, watch and wait for the market to maybe, or maybe not, reach your profit objective.

OCO Order (One Cancels Other)

Another great ‘non market watching’ tool is where traders can set a contingent order – this means one part will automatically cancel out if the other component is executed.  Considering this with the previous example on GBP/USD, entering at 1.7750 when the limit order of 1.7800 is reached the stop loss order that is attached to that trade is automatically cancelled out.

Trading Styles

Within the currency markets traders can make their decisions based on either economic fundamentals or technical factors. Economic fundamentals take into account interpretations of news, political issues and economic data such as government reports, interest and employment rate releases etc. Whereas, technical analysts use price patterns, resistance and support levels, and various price and time indicators to identify potential trading opportunities.

Neither style is better than the other, the true determining factor for success is that the style suits the individual trader; it should all come together and make sense. Some traders find using both methods works for them. Although it is still important for technical traders to keep an eye on the economic calendar so that they are aware of news and data releases and be ready for significant market movements which are essentially the expectations of the market participants. The great advantage is that economic data is released and available to all market participants at the same time – creating a fair game for everyone and a great opportunity for profit.

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