If you remember my series on Forex Trading Basics Part I and II, you’d remember a section on Pending Orders. Yes! That phrase is making a comeback. Today we’ll talk in detail about how to protect your trading position and profits with trending orders.Come to think of it, you need to protect your trading position and profits with pending orders. You need them because you need to pry your tired self away from your PC screen and let the market for you. Instead of sitting in front your PC all day hunting for profitable trades and possibly turn into a scarecrow, how about placing your pending orders, let the market do the work for you, and go hang out with your friends. By the time you get home, your profits will be nicely tucked away in your trading account.
And another thing. The forex markets are open 24/7 around the world anyway.. So why will I want to sit in front of my screen all day watching forex prices tick up and down as if I’ve nothing better to do. Guess what!Pending orders to the rescue. Just give instructions to your broker through your pending when you want to buy or sell while you chill out on the beach. In so doing you use the pending orders to protect your state of mind by automatically and quietly exiting your trading position in case the market does a sudden U-turn on you – as it’s prone to doing sometimes. And the pending orders will help you rake in the profits while you’re sipping your punch on the beach. Almost like profits on autopilot if you ask me.
So guess what we’re going to do? We’ll define what pending orders and how to trade using these pending
But first things first:
What Exactly Is A Pending Order?
Well, a pending order is an order that is only executed when market conditions are met. Pending orders are a standard way of having some say so as to the direction you want your trades to go. while you are away from your PC screen chilling with your friends. You can set your own specific threshold for loss and profit, or even set up orders for entering and exiting your trading position. The neat thing about this pending order is that you can leave your trading position and go to the beach with your mental faculties intact, knowing that should the price hit the intended target, the order will be executed and you will make your profit. Doesn’t get any better than this. Does it?
Now Let’s Look At The Four Types of Pending Orders
Now there are four types of pending orders that you get to play with. The first pending order is :
Well a buy limit order is a pending order you place below the prevailing market price in anticipation that the price will drop, turn around to hit your target price and head on up. This is your way of taking protective insurance in the event that the price heads south. The best region to set your buy limit will be just below the support level. Some of you are wondering”Why should I place the order at the level of support?” Well the experts believe that should the level of support be breached, price will nose down like the law of gravity until it comes face to face with the next level of support. Now let’s see how to place the buy limit using the EUR/USD pair.
The pinkish straight line is the level support and the pinkish price next to is your pending order. As you see, the level of support was preceded by the level of resistance. You place the buy limit just underneath the level of support as indicated by the arrow. so that when the prevailing price arrives to massage it, it will trigger a bullish race for the hills. And all this will be happening while you’re chilling at the beach. Doesnt get any better than this. However, like I said earlier, placing your buy limit at the line of support is your insurance policy against a possible crash.
Next in line is:
A Sell Limit
Just so you know! A sell limit is also a pending order just like the buy limit. Except that you place the sell limit above the prevailing price in the event that the price will climb up to stroke your target price and head back down in the opposite direction. A very good spot for placing your sell limit is at the level of resistance where you have this gut feeling that the bulls will make an appearance. You’re hanging on to the belief that once the price hits the resistance barrier it’ll careen back down like a ping ball. Let’s see how to place a sell limit using EUR/JPY pair.
First of, the support level has been pierced twice, eventually converting into the new resistance barrier. And by the way, the color is still pink. The adjoining price in pink represents the buy limit just above the going price.. All you have to do is to place the buy limit just above the resistance level, as indicated by the downward arrow. Once price hits your buy limit and heads back down as expected and indicated you should make a hefty profit.
Next is :
With a buy stop, you place the pending order above the going market in the hope that the going price will nudge the pending order and continue climbing up the hill. Trading wisdom suggests that you place your pending order at the level of support. This is done to anticipate a possible upward surge by the bulls once they overrun the resistance barrier. Let’s see how to place the buy stop in action using AUD/USD pair.
See the resistance level all decked out in pink. At the far end is the price representing the buy stop. The white arrow indicates the spot where you’ll place the buy stop-which is just above the level of resistance. Once you do that you’ll be able to catch the bullish breakout as evidenced by the graphic. Not to mention the fact you will make some serious moolah along the way. And like earlier, all this is happening while you’re out of the house. No need to be staring at your screen all day.
And last but certainly not the least
A sell stop is another pending order you place below the market price in anticipation that the price will take a huge plunge. You make this placement in anticipation that price will hit your target and plunge even further. Great places to place a sell stop are either breakout of a rising trendline or at the support level. Now let’s take a look at a sell stop using the legendary GBP/USD
Now here is the breakout at the level of support. If you want to catch the bearish breakout slalom, you place your sell stop order at the level of support as indicated by the red arrow.. And there can be only If you one end result! LOTS OF MOOLA while you ‘re far and away from your PC screen.
If you want to sharpen up on breakouts at support and resistance levels, I suggest you consult Identify Support and Resistance Levels With Price Action Analysis and Breakout Trading Breakouts.
That’s a wrap for ”How To Protect Your Trading Position and Profits With Pending Orders .” As you can see pending orders help make your life as a trader a whole lot easier. In fact I dare say that if you do not want to spend the rest of your natural life staring at your PC screen, not to mention turning into a scare crow, pending orders are the way to go. Just place your orders,head for the beach and leave the markets to do the work for you. Till next time take care.
Looking To JoinThe Forex Trade Bandwagon?
If you’ve stumbled in here looking to join the forex trade bandwagon, here is what you need to do . First, look up Why Forex Trade Is So Popular. Next, you learn the fundamentals of forex trading by reading Forex Trading Basics – Top To Bottom Part I and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns . Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis, instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading?
Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels. And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know How To Read Candlestick Patterns using Support and Resistance Levels.
However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch of several weeks, consult How to Spot High Probability Trades. And if you are still not sure about price action trading, find out Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the suggested posts above are the most important posts to get you started.
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