FOREX CHANNEL > Let's get started forex trading from zero > Limit order and Stop loss order
*Japanese FOREX CHANNEL
Let's get started forex trading from zero

Difference between limit order and stop loss order

We do not feel familiar the words, the limit order and the stop loss orders. What is the difference? Let us explain once again here. The limit order is used in case that you do not want to buy now but want to buy lower. Accordingly it enables you to buy it cheaper. Unlike the market order, you have to wait a moment till the limit order should be filled.

The stop loss order is different from the limit order in the execution prices. You have to specify the execution rate in adverse to the current market level against your position. It is often the case that you should need to cut the losses when you enter the forex market.

What is the reason for the distinction? It makes no room for the forex brokers to make money by arbitrage. Some brokers might in bad faith execute your stop loss orders disadvantage to you, which gives them easy money to cover the position in the current market. This action is broadly called as arbitrage. It is more accurate to define the arbitrage to buy value price and to sell overvalued, but the brokers are possible to make use of the customer orders and the forex markets to cover as an arbitrage.

Simply speaking, you had better keep in mind that you should place the limit order when the forex market moves in favor of your position and place the stop loss order when again your position.

How to use the stop loss order

It is generally comprehended that the stop loss order exists for loss cutting, but there are some more convenient use to remain. For example, you are assumed that you should not take position in a current band and have intention to make position to follow up the new trend when the forex market breaks the range, like "I want to buy when the forex market exceeds the highest" or "I want to sell the lower when the forex market breaks through". In this case, you can make much use of the stop loss order for the sake of fresh position.

 
 

page TOP

*