Market Execution vs Pending Order
When you put in a request to purchase or sell an asset, that order goes into a handling framework that puts in a few orders before others. Securities exchanges today are totally automated, kept running by PCs that do their work, depending on an arrangement of standards for handling orders.
However, you have the freedom to choose the way in which your order is processed, based on the price you choose to trade at. You can execute your trade at market prices via market execution or give instructions to trade at a specific future price via a pending order.
What is Market Execution?
Market execution is the most basic type of trade execution and is used to buy or sell securities at the current market price. Trades are executed at the current ask and bid prices. The advantage of using market order is that it guarantees that the trade will be executed. If a trader wants to get into or out of a position, a market order provides the most reliable method to accomplish just that. But it can lead to the execution of an order at a less favourable price. A market with high liquidity provides viable opportunities for market orders, otherwise crucial slippage can occur in trades. Stop loss and take profit cannot be used in market orders.
What is a Pending Order?
This is an order to buy or sell securities at a desired price. In a pending order, a trader instructs their brokerage to buy or sell an asset at a pre-determined price. Pending orders are used to execute a trade at a position that will be achieved by the market in the future.
There are 4 types of pending orders that can be placed for execution.
1. Buy Limit
This involves the buying of a security at a specific future ask price, if that price matches the predetermined price. Generally, the current price of the asset is higher than the value of the pre-determined price. These orders are placed because the trader expects the price of the security to drop down to a certain level and then witness a bullish trend.
2. Buy Stop
This also involves buying of a security at an ask price in the future, if and when the price matches the predetermined ask price. Here, the current price of the asset is usually lower than the pre-determined price. These orders are places when the trader predicts that the price of the security will reach a certain level and will keep rising.
3. Sell Limit
It involves selling of a security at a bid price in the future, if the price matches the predetermined bid price. Generally, the current price of the asset is lower than the pre-determined price. These orders are placed when the trader anticipates that the price of the security will increase to a certain level and then will witness a bearish trend.
4. Sell Stop
This involves selling of a security at a specific bid price in the future, if the price matches the predetermined ask price. Generally, the current price of the asset is higher than the pre-determined price. These orders are places when the trader expects the price of the security to reach a certain level and then continue falling.
While placing pending orders, it is important to ensure adequate risk management through the use of Stop Loss and Take Profit orders.
This is used to reduce losses if the price of a security starts to move in an unfavourable direction. If the price of the security touches the stop loss level, the position will be closed automatically. It is usually attached to a pending order or an open position. This order is always placed below the present bid price in a long position and above the current ask price in short positions.
This is used to limit the levels of profit if the price of a security rises to a specific level, to avoid losses if the market suddenly changes its direction. Take profit orders lead to the closing of a position and are always attached to a pending order or an open position. This order is generally set above the current bid price in long positions and below the current ask price in short positions.
When to Use Market Orders
When does the use of market order make most sense? If you are stuck in a position where the market movement is against you, a market order will help you get out of that position quickly. Generally, investors are worried about prices when entering or exiting positions, but there are times when buying or selling is more important than the price itself. You might wish to acquire or get rid of an asset quickly and this could prove risky. Therefore, it is important to make careful, informed decisions for market orders.
Using Pending Orders
There are some things that traders should keep in mind while using pending orders, such as:
- Determining the Entry Point: The trader has to calculate the minimum and maximum price at which the trends will continue in a favourable direction. Sometimes, pending orders can be placed by assuming that resistance and support of a price range will break. Another way an entry point can be determined is to wait for the release of important news. The trader will need to analyse the timing of the news and place the trade accordingly.
- Placing Take Profit: This depends on the speculation and goal of the trader, based on the current market situation. The trader will need to assess the size of the potential gain and the probability of loss if the market changes direction before placing an order.
- Placing Stop Loss: Stop losses are placed based on the trader’s risk appetite and trading strategy. It is useful to define the terms of expiration to ensure that the pending order is executed according to guidelines set by the trader.
Both market execution and pending orders are important to make the most of all types of market conditions. However, traders need to be careful to not allow emotions to colour the decision to implement one of the two types of orders. Instead, they should work on technical and fundamental analysis, charting tools and other tools at their disposal to make informed decisions.
Personal accountability is a valuable trait to have in a forex trading journey. It encourages traders to focus on experiential learning and quality performance to reach target goals. No matter what the market movement is, an accountable trader will take charge of how trades are achieved. Instead of placing blame on things like the forex market or economies, a trader with personal accountability will immediately accept every outcome and efficiently learn from it. This creates a more fruitful trading experience and improves overall mental health. To gain a more proactive and positive way of thinking, apply personal accountability for a better mindset and more enjoyable trades.What is personal accountability?Do you believe that you control the success of your forex trading career? Long term success is achieved through determination as well as self-accountability. Personal accountability means taking responsibility for both actions and outcome in any trading scenario. It is an act of showing readiness to accept the circumstance, evaluate what went wrong and improve from there. According to Habits for Wellbeing, personal accountability is a habitual commitment achieved by taking ownership and action. When you hold yourself accountable, output, efficiency and performance greatly improve.Use personal accountability to optimize decision making as well as trading results.Importance of self-accountability when forex tradingBeing accountable is an influential characteristic for good work ethic. Like in any career, target goals can be achieved when you take responsibility for all your efforts. In forex trading, it is easy to quickly blame market movement for unforeseen mishaps. Whether you end up with a winning or losing trade, it is important to know that you are in control of all your trading output.Self-accountability in a forex trading career is a beneficial characteristic when facing different types of trading scenarios. The idea of being accountable for all actions can mould any new trader into an effective and growth-oriented expert. Get to know the important benefits of personal accountability:* Avoids unnecessary reactions like procrastination or blame* Promotes a proactive way of thinking* Encourages solid work ethic* Reduces trading anxiety or distress* Boosts management skills for completing tasks* Inspires traders to stay consistent with efficiency and diligence* Enables you to move on from trading lossesThe power behind taking responsibility for your actions lies in putting an end to negative thought patterns. You no longer dwell on what went wrong or focus on whom you are going to blame. You don't waste time building roadblocks to your success. Instead, you are set free and can now focus on succeeding. – Lorii Myers, Entrepreneur / Award Winning Author / Adventurer / Sports Enthusiast / Relentless Self-promoterAction plan for personal accountabilitySuccessful forex traders are responsible for accomplishing vital tasks. After these tasks are completed, they are also accountable for every outcome. Whether these results are favorable or not, an accountable trader will always accept the scenario and find ways to optimize. By taking accountability of your actions, problem solving and positive thinking can easily be attained. To become a profitable trader, be sure to accept the results of every decision and learn from it. Here are great ways to achieve personal accountability when forex trading:Start with the right mindsetIn every trade, it is beneficial to have a mindset that is responsible of all outcome. Before building an action plan for personal accountability, you must first start with the right way of thinking. When you achieve the right mindset, you can efficiently follow through with the skills needed for self-accountability and success. If traders habitually blame the forex market, this negative mindset may lead to undesirable results. Here are top tips to acquire the right mindset for personal accountability:1. Find your mantra. Use your target goal and an inspiring thought to help you during challenges. Once you put value to why you have to succeed in trading, following through with personal accountability will be effortless.2. Expose yourself to positive traders or successful individuals who can inspire you with a sense of self-empowerment. Learn how to achieve success as 7 Experts Share Their Secrets To Achieve a Positive Mindset.3. Read the right blogs or books to get the right mindset while you are away from your trades. If you continuously expose your mind to positive thoughts, your mindset can greatly improve for trading and for your personal life.In a changeable market, traders can easily place all the blame on sudden movement. Because of this, you have to be in control of your reactions and thought process. Whether these are vital activities or day-to-day tasks, having an accountable mindset can boost positivity and proactive planning. For efficient and enjoyable trading career, try these Best Mindsets for Optimal Forex Trading.Proper education and updated knowledgeSelf-accountability has much to do with being knowledgeable. A well educated trader knows that forex trading can lead to scenarios beyond their control. Because of this, forex education and staying updated can provide more direction and an overview of the forex market. This means less risky trades and more control over your strategy.In the long run, being a well informed forex trader can encourage a more accountable frame of mind. With a market full of possibilities, it is inevitable to experience unexpected turns. Forex traders should gain quality education and updated news to foresee any mishaps and to be responsible for all output.The more you practice personal accountability, the closer you get to your trading goals.Define your target outputYou cannot attain personal accountability without knowing what you want out of trading. To become a self-reliant and accountable trader, you must clearly define your target goals. Once you determine what you want out of forex trading, you can efficiently plan and organize the steps needed to succeed. Doing this can help you achieve personal accountability when trading. Planning your progress can provide more discipline and effectiveness to deliver target results.Always manage expectationsAfter achieving quality education and defining your goals, it is important to actively manage your expectations. This is an important step towards personal accountability because it enables traders to always see think realistically. With the right knowledge and results in mind, forex traders can be clearer about personal expectations. Doing this will not only help with self-accountability, but also the amount of work expected from the trader. It can encourage traders to oversee reality versus target goal. Practicing this mindset will allow you to easily accept challenges and remain accountable for all trades.You must put in time and effort to achieve your goals while also keeping in mind the expected challenges of forex trading. To help you manage expectations, learn the 10 Healthy Ways to Set Trading Expectations.Practice problem solving with technical know-howOnce you've achieved personal accountability, the next step is to practice problem solving. Without knowing how to improve the technical aspect, some traders may have a more challenging time creating an action plan. Because of this, always pair problem solving with optimal technical know-how.After you hold yourself responsible for all trading output, you can easily stay consistent or enhance your trading strategy. Here are the 3 most effective ways to practice problem solving:1. According to Jon Mertz of Thin Difference, to solve the problem we must understand the problem. He suggests to turn the problem inside out to determine the details of challenge.2. Optimize your technical expertise to follow through and solve the problem. It is difficult to be accountable if you are not fully equipped with the necessary technical skills.3. To be self-accountable, you have to become instinctively adaptive. This means being able to change while remaining optimistic in the process.For continuous growth, apply personal accountability to achieve optimal trading.Responsibility while taking accountabilityTo become a successful trader, you have to take responsibility to efficiently accomplish all the tasks required. After this, you have to achieve personal accountability to be able to take action when needed. Even though trading is a personal venture, every activity still requires accountability. It means being able to rise above any situation and provide solutions for further progress. Whether you are a new or expert trader, mishaps can happen. By practicing personal accountability, you will be able to evaluate your efforts and effectively direct them towards success. Doing this will not only boost your performance but also encourage a well-rounded trading character.For long term success, wanting profitable trades is not enough. Traders have to make a conscious effort to optimize strategies and accomplish tasks. In an uncontrollable market, taking responsibility of your decisions will build better trading character and initiative. Self-accountability also promotes better leadership skill which enhances overall mindset during any hardship. Practicing personal accountability will also ensure a performance-driven growth and proactive problem solving. A trader who is accountable has a great sense of when a strategy or skill needs improvement. Without viewing the challenge negatively, traders can easily take on obstacles with a progressive mindset.
Forex strategies help investors to stick to a particular plan when trading currencies. The discipline has proven to be elemental in increasing profits generated from Forex markets. Forex strategies can be based on technical analysis or vital, time-based events. Nonetheless, investors need to find the most profitable Forex strategies that will maximize their chances of amassing massive profits. An effective strategy should be simple and have customization features. Position Trading Strategy With the rising trends in the Forex market, several traders keep wondering why they are not making enough money from the market while winners running trades for weeks and months reap thousand of pips in profits. The position trading strategy is so far the most profitable Forex strategy. Top traders have attested to the magic position trading has worked for their Forex profits, and its high time Forex investors adopted the approach. However, short-term traders may find position trading challenging, but surprisingly, it’s the easiest and top profit earner for patient trade gurus. As a position trader, you will be interested in longer term price movements in the market. Nonetheless, this technique requires you to have an in-depth knowledge of the essential factors that can influence price changes in the long term. Additionally, comprehension of technical timing is crucial to enable you get in and out of particular positions at the most convenient time in the extended market cycle. Pointers to a Position Trader You are more likely to succeed in position trading if: - You have a deep comprehension of Forex fundamentals and how they affect your currency pair. - You are patient enough to wait for your grand rewards. - You make educated and independent decisions that are not influenced by popular opinion about market movements. Technical Tools That You Will Find Helpful in Position Trading 1. Support And Resistance The aspect of support and resistance forms the basis of technical analysis in Forex trading. Conventionally, Forex investors buy at or near areas of significant levels of potential support in an uptrend. Contrarily, the traders sell near or at positions of substantial levels of possible resistance in a downtrend. Resistance refers to the areas where prices stop in an upward movement and turn around. Consequently, resistance stops further advancement of the price. The vice versa is true for support. 2. Trend Line Indicator The trend line, though simple, is an indispensable trading tool in position trading. Undoubtedly, trends and price actions become evident when viewed over more extended time frame charts. Accordingly, apply a trend line analysis to capture invaluable insight into the market based on the general direction of the price action. 3. Moving Average Indicators Moving average stands out as a practical, useful, and easy Forex indicator for position trading. The indicator accumulates past price points and averages them to provide you with a better view of the currency movement. A moving average indicator can be simple (SMA) or exponential (EMA). Additionally, you can utilize the averages to establish the trend of the prices. For instance, a currency pair could follow a period of rising value in a particular time frame. This forms an excellent opportunity for traders to harness profits. On the contrary, a downtrend over a period translates to losses to investors. Furthermore, as a keen position trader, you will need to regularly analyze macroeconomic data of the major countries represented by their respective currency pairs. Some of the crucial economic factors to consider in position trading include; - Inflation rates - Economic and political stability - Interest rates - Trade balance A Sample Position Trading Whereas there may be variations in position trading strategy, the following steps will guide you on how to trade using the approach. You may consider customizing the strategy a bit to fit your preferences. Select your currency. You need to find currencies that have been gaining over the recent months and those that have been falling too. For measurement, set a 12 period and scan the weekly charts of the most prominent currency pairs. By looking at the currencies that have remained above or below 50 in their crosses or pairs, you can determine which pair to trade in the following week or session. Install charts on appropriate time frames. Proceed to install the 10-period RSI, 10 period SMA, and 5-period EMA. You should enter trades in the direction of the trend when all the indicators align in the same direction as the trend on all time frames during active hours. Determine the percentage of your account that you are going to risk in each of your trades. Determine the cash you intend to risk and divide it by the 20-day average true range (ATR) of the currency pair you are about to trade. This shows how much you should risk per pip. Enter the trade as per step 3. Place a hard stop loss on 20-day ATR away from your entry price. Exit manually if the trade moves against you rapidly by about 35 pips and shows no sign of returning. If this doesn’t happen, wait until the end of the day. Exit if the trade is showing a loss with no promising candlestick pattern. If the trade is in your favor by the end of the day, wait for it to return to your entry point. Additionally, when it fails to bounce back a few hours after hitting the entry point, exit the trade. This should continue until the trade reaches a level of profit twice your hard stop loss. Subsequently, move the stop to break even. As the trade grows in your favor, move your stop in the direction of your profit target. A good trade should make thousands or hundreds of pips in a superior trend.
The contract for difference (CFD) is the difference between where the trade is entered and exited. A CFD is a kind of tradable instrument that imitates the movements of the underlying asset. When the underlying asset moves in relation to the position taken, it enables for losses or profits to be realized, but the actual asset that is underlying is never owned. Basically, it is a deal or contract between the broker and the client. CFD trading has a number of advantages, and these have increased the popularity of the instruments over the last few years. How a CFD works Trading CFD is very straightforward. You just have to select the asset you want to trade and enter your order. If you think that the price of the asset will increase, you can enter a “Buy” order. You should keep in mind that when a CFD trade is entered, the position will show a loss similar to the size of the spread. Advantages Some benefits of CFD trading are discussed below Higher leverage Trading CFDs comprises leverage. This means, in order to open a position, the traders have to pay only a fraction of the total value that the trade has. This is what margin is, and generally, a small percentage of the full trade value is needed upfront. Leverage assist traders in magnifying profits, in the same way, losses are also magnified as well. Before the traders take advantage of these, it is essential that they understand the risks that leverage and margin entail. No stamp duty There is no stamp duty to pay on a CFD trade which is unlike traditional share dealing. Nevertheless, tax laws can change. Trade on both falling and rising markets CFD trading enables you to trade both when the price of a product is going down as well as when it is going up. You can try and benefit from both the selling opportunities and buying opportunities. There are many traders who use CFDs as a way of hedging their portfolios through periods of short-term volatility. Use CFDs as a portfolio hedge Do you think that your current portfolio will experience a loss? If so, you can short sell-by utilizing CFDs which will help you in offsetting any portfolio value losses. CFDs are regarded as great hedging tools. There are many organizations and individuals who use these vehicles in order to hedge against portfolio losses.