A Trader’s Secret Weapon: Pending Orders

Sometimes, you don’t want to enter the market at the price it offers you. You can have different reasons for this. For example, you know that you can buy the pair at a lower price and you just wait. Or you are not sure about the further direction of the price but know that if the pair reaches a certain level, its further direction will be clear. So, what should you do? Sit in front of a monitor and wait until the price level meets the conditions you want? Definitely not. Pending orders were created for you!

There are two types of pending orders. They are limit orders and stop orders.

As a trader always makes a choice whether to buy or sell, it follows that there are two types of limit orders: buy limit and sell limit. Stop orders can also be broken down into buy stop and sell stop orders.

Let’s start with a limit order.

Suppose you believe that a price that’s going down now will rebound from a certain level and then go up. You should place a BUY LIMIT order at the level you think will be a reversal point for the price (below the current price). With this type of order, you can buy at a lower price.

Buy limit

Vice versa, there may be a time when you see that the price is moving up but you are sure that it will meet a strong resistance, recoil, and go down. In that case, you should place a SELL LIMIT order above the current price. A feature of this type of order is that you can sell at a higher price.

Sell limit

Notice that you use limit orders when you expect either a support or a resistance level to hold.Now let’s look at another type of pending orders — a stop order.

Stop orders are used when a trader expects the price to break through a resistance or a support level.

Imagine that the price goes up and you are sure that if it reaches a certain level, it will go even further. In that case, you should place a BUY STOP order at a level above the current price.

Conversely, assume the price goes down and you perceive that after it reaches a certain level it will go down even further. As a result, you place a SELL STOP order below the current price.

You may ask: why should I use the stop order if the price doesn’t rebound and just continues its movement in the same direction? I can buy at the lower price or sell at the higher. The stop order is used to accurately confirm the further direction of the price. If the pair reaches a certain level, you can be sure it will go further; otherwise, it will rebound before it reaches the level you choose.

An important tip: remember that if the price doesn’t reach the level you chose in your pending, the trade won’t open. This is a big risk for your profit. You must close the order if it was not implemented. Otherwise, you might forget about it and a trade will open at a time when you don’t want it. One solution is to set an expiration time for your pending orders.

SUMMARY

Pending orders are a great way to reduce your efforts and time in front of the screen. Moreover, pending orders will help you be certain of the future direction of a price, enabling you to enter the market at the most attractive price. It’s a great way to make your trading more precise and more profitable!

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