Types of market orders. Why is a pending order good? Gap on a pending order.

In order to enter the market, it is necessary to form and send to a brokerage company that provides you liquidity, a trading order called an order.

In this article, we will analyze the types of orders.

First of all, there are buy orders (BUY) sometimes they say “opened a long position”, and sell (SELL) otherwise, “opened a short position”.

Further, there are market orders and pending orders.

That is, we have several types of orders at our disposal, namely:

  • buy market order means the order “buy an asset at the current price”;
  • sell market order means the order “sell the asset at the current price”;

The figure below shows how to activate both types of orders. To do this, just click on the buy or sell button.

Market orders provide entry into the position at the current market price where ask is the seller’s price and bid is the buyer’s price, remember that ask is more than bid. That is, you buy at the ask price, sell at the bid.

Now let's move on to placing pending orders:

pending buy-order means the order “buy an asset when the price level specified in the order is reached (in the picture below you see the necessary actions for this select the“ pending ”checkbox, set the desired price in an additional window and click the buy button);

  • pending sell-order means the order “sell the asset at the price specified in the order (in the picture below you see the necessary actions for this select the“ pending ”checkbox, set the desired price in an additional window and click the sell button)

The advantage when trading using pending orders is the lack of the need for a permanent presence at the trading terminal. The disadvantage is that if the levels for entry by a pending order were not determined correctly, then they will remain in the pending status.

It must be remembered that pending orders that are set at a price better than the current one (sell above the current market, buy below the current market) are copied into the order glass and also require a pledge.

If you want to open a pending order at a price worse than the current one (for you), for example, if the current price is 1000 and you want to buy at 1100 or sell at 900 (in case the price reaches this level) your application not visible in a glass of prices.

Gap on a pending order

A gap is a price gap in quotes.

Depending on the cause of the occurrence (usually unexpected or very strong information), it can reach as many as hundreds of points. The most recent examples are the 2017 French presidential election and the UK parliamentary election.

In both cases, it was a question of hundreds of points. What should you always remember in the context of the appearance of a gap when trading a pending order? In this case, the order will be opened at the first market quote after the price gap. Carefully read the rules of your broker. And re-read the conditions for the execution of all types of pending orders described in this article above. And remember that the price at which you want to open a deal may differ from the expected one by several hundred points if it falls into this price gap. Especially unpleasant if it is a stop loss. Take profits are always executed at the installation price since they fall into the order book.

As can be seen from the figure below, the first round of the presidential election in the Fifth Republic cost a pair of EURusd almost two hundred points.

The closing level of Friday is 1.0723, the opening level of Monday is 1.0917. Everyone who opened short positions on Friday suffered losses, because the previous local maximum, broken by this gap, was the technically correct level for stop loss. And gamblers, with a pending buy order set above 1.0790, got a position at a price much worse than expected.