Pending orders are one of the features that you can find on various trading platforms, both provided by brokers and by third parties such as metaquotes. This feature allows you to place orders at levels the price could potentially reach in the future. That way, you can open orders without having to constantly monitor prices.
The pending order feature consists of two types: stop orders and limit orders.
A stop order is a type of pending order that is used to open a position in the direction of price movement. So, you can use it when you predict that prices will continue to move in the same direction or what is often called a trend movement. Therefore, this feature is often used by people who make transactions based on breakouts.
To use it, you can select in the “instant execution” section then select buy stop/sell stop according to the order you are about to open. After that, fill in the price level where you will place the stop order. Lastly, don’t forget to fill in the stop loss and also take profit columns as an exit place for a profit or loss transaction.
Meanwhile, a limit order is a type of pending order that can be used if you want to open a position against the price movement. This type of pending order is meant to be used when you predict that the price will move in the opposite direction. Therefore, this feature is often used together with the rejection method.
To use it, you can change the instant execution option when opening a position to a sell limit/buy limit. Then determine at what price you will place the pending order. Then, also determine the stop loss level and also the take profit.
Advantages of Using Pending Orders
The pending order feature certainly provides a number of advantages in your trading activities. These advantages include, namely:
1. No need to be afraid to miss the moment
With pending orders you will no longer miss certain momentum that has the opportunity to give you profit. Because this feature allows you to place orders even when the price is still far from the levels that you consider potential.
2. Not affected by psychological factors
Using pending orders also keeps you from being influenced by psychological factors when opening transactions. For example, opening orders faster when there is no confirmation, opening orders using large lots because they are too confident and so on.
3. Make trading more planned
Using pending orders can also be used to ensure that the price actually follows the plan you made based on the analysis you did. Because when using a pending order, the order will only be opened when the price is actually going in the direction we previously predicted.
Disadvantages of Using Pending Orders
Apart from the advantages above, using pending orders also provides some disadvantages, namely:
1. Orders placed are not always open
Using peding orders makes the orders you place not always executed. Either because the price moved the opposite way than you predicted or the level where your order was located was a little farther from what the price could have reached.
2. Can not avoid the risk of fluctuations that increase suddenly
Using pending orders also leaves you with nothing to do when fluctuations suddenly increase when they reach the level at which the order was placed. Conditions like this often make price movements hit stop losses because the range of movement is wider. Apart from that, in these conditions there are also risks such as require and slippage which make orders not open, or make stop loss and take profit not work.
Examples of Limit Orders and Stop Orders
1. Limit orders, consisting of sell limits and buy limits
There are two types of execution of the limit order model, namely sell orders (sell limit) and buy orders (buy limit), these two models are used for opposite models of price movements. For example, the GBPUSD price is from 1.1000 and a sell limit order is at 1.1300. This means that the price moves from below to the execution of the sell order at the high part of the price and vice versa.
2. Stop orders, consisting of buy stops and sell stops
The type of execution of the stop order model consists of two, namely sell orders (sell stop) and buy orders (buy stop). Unlike the limit order for this type of execution, the price must be in the same direction, for example, when the price is at 1.5000 going to the price of 1.4000, then we can place a sell stop at the price of 1.45000, here the price treatment must be in the direction where the price came from, if the price is from the high then the sell stop order must be the price below the high.
So, based on the explanation above, what are the advantages of position orders, of course we can get the best price according to what we expect. The price is also often the peak or valley price which we get according to assumptions with analysis. Apart from that, with the order model, we can adjust the price we want. Meanwhile, in terms of the advantages, it is quite clear that we can place prices which are in accordance with the trading plan and are believed to be price executions with relatively small risks based on calculations that are carried out accordingly and based on the analysis that we have planned.