For Forex beginners, buying with foreign exchange trading may seem complicated at first glance. There are various ordering methods, and you may hesitate to start trading due to the complexity. Therefore, this time, for Forex beginners, we will explain how to buy Forex, types of ordering methods, and precautions.
Basics of how to buy with foreign exchange trading
Let’s take a look at the basic ordering method for foreign exchange trading. The basic ordering methods are market orders, limit orders, and stop orders.
Market order in foreign exchange trading
- The easiest way to place an order is a market order. Suitable when you want to buy or sell currency right away.
- For market orders, you cannot specify a rate. Therefore, if you place a market order when the market price fluctuates greatly, a buy order may be completed at an unexpectedly high price, or a sell order may be completed at an unexpectedly low price. Market orders can also be used to quickly close open positions to secure profits and reduce the risk of increased losses.
- If you have a new position, a limit order or stop order that closes the order at the rate you want is suitable. In Forex, the price of the currency is called the “rate.” Rates are changing in real-time. In addition, there are two types of rates used for Forex trading: the rate for sell orders “BID rate” and the rate for buy orders “ASK rate.” When you place a buy order, you will trade at the ASK rate price, and when you place a sell order, you will trade at the BID rate price.
- Limit order in foreign exchange trading
- A limit order is a method of placing an order by specifying a price when you want to buy at a price lower than the current rate or when you want to sell at a price higher than the current rate.
- For example, if you buy US dollars, you should buy at a lower rate, and if you sell, you should sell at a higher rate. In this way, limit orders fulfill the desire to buy when the price is lower than the current rate and sell when the rate is higher than the current rate.
Stop order in foreign exchange trading
- Stop order is a method of ordering by specifying a price when you want to buy higher than the current rate or sell at a price lower than the current rate.
- Stop orders are when you aim for a higher price by buying a currency that has a strong market price, accelerates momentum and is on an uptrend, and buys it on a large market flow, or conversely, the currency is depreciating. It is an ordering method that aims for profit in a currency market that plunges by placing a stop sell order when you are there.
- Next, let’s see how to buy FX in an applied way. By remembering these, you can broaden the range of transactions.
IFD order in foreign exchange trading
- An IFD order is “If done,” which is a method that allows you to place a new order (primary order) and a settlement order (secondary order) that becomes effective when a new order is completed.
- For example, you can place an order at once, such as buying a new one for 1 dollar = 110 yen and then settling and selling for 1 dollar = 115 yen.
OCO order in foreign exchange trading
- OCO order is an abbreviation of “One Cancels the Other” and is an ordering method that allows you to place two orders at the same time. When one order is completed, the other order is automatically canceled.
- For example, if you have a buy position of US dollar-yen at 1 dollar = 110 yen, you will make a limit sale for profit-taking when 1 dollar = 115 yen and a stop-sale with a loss limit when 1 dollar = 105 yen. You can place an order like this.
IFO order in foreign exchange trading
- An IFO order is a combination of two ordering methods, IFD and OCO. OCO orders are now automatically triggered after an IFD order is filled.
- When a new order and the new order are executed, two types of settlement orders (limit sale for profit-taking and stop-sale for loss limitation) are made at the same time, a total of three orders in one set—the method.
Trail order in foreign exchange trading
- Trial order is an ordering method that automatically adjusts the rate level of stop orders according to the rate’s increase or decrease. When ordering a stop price, the stop price of the sell can be raised, or the stop price of the buy can be lowered depending on the price movement of the rate at that time.
- Trail orders are auto-corrected only when they are in your favor, so you can control your risk and increase your profits.
Streaming order in foreign exchange trading
- Streaming order is an ordering method to place an order at any time with the rate presented in real-time.
- Unlike market orders, the contract rate does not fluctuate, so it is a convenient ordering method that allows you to execute at the desired rate and does not execute if the rate fluctuates in a disadvantageous direction.
How to buy FX called automatic trading
- Forex has a buying method called automatic trading, which entrusts the buying and selling to the system. Even if you do not place an order yourself, the system will automatically repeat buying and selling and make a profit.
- So how does this automated trading system work? Also, let’s look at the advantages and disadvantages of automated trading.
What is an automated trading system?
- There are two main types of Forex automatic trading: “repeat order” and “system trade.”
- A “repeat order” is an order in which buying, selling, and settlement (profit/loss cut) price ranges are set in advance, and trading is repeated within certain rules. It is suitable for busy people because it can be set once and left unattended.
- In “system trading,” trading is performed mechanically and continuously based on the set rules. There are two types of system trading: a selection type that selects from the strategies prepared in advance and a development type that programs the strategy by yourself.
- For Forex beginners, we recommend the selection type, which allows you to choose the one that suits your trading rules from multiple strategies.
Advantages of automated trading system
- The advantage of the automated trading system is that you can make a profit even in a market where it is difficult to make a profit in discretionary trading. It is difficult to predict the range market where the exchange rate rises and falls repeatedly, and it is difficult to make a profit in discretionary trading, but in the case of automatic trading, it may be possible to make a profit even if it is left unattended.
- Another big advantage of automated trading systems is that they are not affected by emotions. The system will buy and sell based on reasonable judgment. Furthermore, the system will automatically buy and sell for busy people, so it is a big advantage that you do not have to stick to the chart.
Disadvantages of automated trading system
- The disadvantage of automated trading systems is that they may be inferior to discretionary trading in markets where there is a clear trend. Not all quotes are more profitable than discretionary trading.
- Especially for beginners, the difficulty of the initial setting is also a disadvantage. At first, it’s a good idea to imitate someone else’s settings or set them for a small amount to get a feel for them.