Placing Orders

Learning the basics of trading CFDs is relatively simple but if a trader really wants to maximize potential profits and take full advantage of market movements then it is important to explore the different order types that most providers will allow you to implement.

There are obvious advantages for placing orders rather than trading at the current market price, these include the ability to try and obtain a better entry/exit price and also being able to trade with a pre-determined strategy rather than just reacting to the current short term market movements.

Limit Order

One of the most popular orders given to any broker and CFD provider is the limit order.  Limit orders mean that you are either giving an instruction to buy at or below the current market price or sell at market or a price above. With this type of order you will never pay more then the specified price or sell lower than the specified price. Limit orders can be used in CFD trading when entering a new trade and for closing a trade at a specified upper limit level.

Stop-Entry Order

Using a Stop entry order at first glance may seem a strange way of entering a particular market. The order works by specifying a minimum price you wish to pay for a long position and a maximum you wish to sell for a short position. Essentially in a fast or gapping market you have a risk of opening a position at a price quite different and disadvantaged to your stop entry level. The main reason for placing this particular type of order is to take advantage of a price break-out, typically if trading is stuck in a tight range then profits can be few and far between. Placing a stop-entry order at the top or bottom of the range means that if it breaks out and fills your order then the price may have left its tight range or support/resistance levels and its time for the price to reach new levels.

Stop-Loss Order

Successful traders all agree that correct money management is one of the keys to trading. Placing stop-loss orders not only gives you protection if you are unable to watch an open trade but also gives traders discipline. Stop-loss orders mean that if a trade moves to the stop level the trade will then be closed at a price either exactly (guaranteed stop loss) or as close to the order level as is possible.

If Done Orders

Traders cannot permanently watch the screen but most traders don't want to miss opportunities. If done orders allow you to set an open order level be it limit or stop and if the trade is executed then a stop loss and take profit limit order can be automatically placed.

One Cancels Other (OCO)

An OCO order is very similar to if done orders but this type of order is placed during the running of an existing trade. The mechanics of this order is to leave a stop loss order and a take profit limit order. If one order is hit and the trade executed then the other pending order will be cancelled i.e. ?one cancels other'

Good Till Cancelled (GTC)

Good till cancelled is an additional ruling to a simple day order, GTC means that the order will keep running until either the price level is reached and filled or the order is cancelled.