What Are Pending Orders in Forex Trading? A Guide to MT5/MT4 Order Types and Usage Tips
A Pending Order, also known as a pre-set order, refers to a type of trade order where traders specify conditions under which buy or sell transactions will automatically be executed at future price levels. Traders can set one or multiple pending orders, and when the market price reaches the predefined level, the system will automatically execute the buy or sell operation based on the specified conditions.
The MT5 (MetaTrader 5) platform supports six types of pending orders, whereas MT4 (MetaTrader 4) offers four types. The following content explores the features of each pending order type in MT5/MT4 and provides insights into their practical application strategies in trading.
Detailed Overview of Pending Order Types in MT5/MT4
The types of pending orders available in MT5/MT4 include the following:
| Types | Platform |
|---|---|
| Buy Limit | MT4, MT5 |
| Sell Limit | MT4, MT5 |
| Buy Stop | MT4, MT5 |
| Sell Stop | MT4, MT5 |
| Buy Stop Limit | MT5 |
| Sell Stop Limit | MT5 |
1.Buy Limit
A Buy Limit order is a pending order to buy at a predefined price or lower. This type of order is used when a trader anticipates that the market price will drop to a certain level and then rebound upwards.
In simple terms, setting a Buy Limit order allows traders to buy at a price they consider to be a valuable entry point when the market retraces.
2.Sell Limit
A Sell Limit order is the opposite of a Buy Limit order. It is executed automatically when the market price rises to a specified level or higher. This order type is suitable when traders expect the market price to rise to a high point and then reverse downward.
In simple terms, a Sell Limit order enables traders to sell at a price they believe to be an optimal exit point at higher levels.
3.Buy Stop
A Buy Stop order is placed above the current market price and is triggered when the price rises to the predefined level or higher. This type of order is used when traders predict that the price will break through a resistance level and continue to rise.
In simple terms, setting a Buy Stop order allows traders to automatically enter the market when the price breaks above a certain level, capturing the upward momentum.
4.Sell Stop
A Sell Stop order is placed below the current market price and is triggered when the price falls to the predefined level or lower. This order type is used when traders expect the market price to break a support level and continue downward.
In simple terms, setting a Sell Stop order allows traders to automatically sell when the price drops below a certain level, taking advantage of the downtrend.
5.Buy Stop Limit
A Buy Stop Limit order combines the functionalities of a Buy Stop and a Buy Limit. Traders first set a trigger price. When the market price rises to the trigger price, a Buy Limit order is placed at a level lower than the trigger price. This type is suitable for traders who want to confirm an uptrend and enter at a more favorable price.
In simple terms, it allows traders to confirm the trend and set a better entry price for buying.
6.Sell Stop Limit
A Sell Stop Limit order combines the functionalities of a Sell Stop and a Sell Limit. Traders first set a trigger price. When the market price drops to the trigger price, a Sell Limit order is placed at a level higher than the trigger price. This order type is suitable for traders who want to confirm a downtrend and enter at a better selling price.
In simple terms, it allows traders to confirm the trend and set a more advantageous price for selling.
Summary:
| Order Type | Description |
|---|---|
| Buy Limit | Enters a long (buy) position when the price falls to a predefined level below the current price, also called a "bottom-picking order." |
| Sell Limit | Enters a short (sell) position when the price rises to a predefined level above the current price, also called a "top-picking order." |
| Buy Stop | Enters a long (buy) position when the price rises to a predefined level above the current price, also called a "momentum-buying order." |
| Sell Stop | Enters a short (sell) position when the price falls to a predefined level below the current price, also called a "momentum-selling order." |
| Buy Stop Limit | Triggers a buy limit order after the price rises to a trigger level and then pulls back, allowing entry at a lower limit price. |
| Sell Stop Limit | Triggers a sell limit order after the price falls to a trigger level and then rebounds, allowing entry at a higher limit price. |
Each pending order type serves unique trading scenarios. Traders can utilize these tools based on their understanding and predictions of market dynamics to optimize trading strategies, manage risks, and seize opportunities. The first four order types are most commonly used.
