In order to execute your Forex Strategy, you will need to to find and sign up with a broker in order to get access to a platform to do so. Irrespective of which platform you sign up to use, you should be able to do the following within that platform.
You should be able to open a BUY position at market
You should be able to open a SELL position at market
But, what does “BUY” and “SELL” means in Forex
You should be able to set orders; both Stop and Limit orders
- What is an Entry Order
- What is a Market Order
- What is a Limit Order
- What is a Stop Order
You should be able to choose indicators if your strategy requires it.
You should be able to add stop loss and limit orders to an open position just in case it was not done at the point of placing the order.
You should be aware and know how to calculate the spread, if it is not shown, for a currency pair that you want to trade as this is how much it will cost you each time you place a trade.
What does “BUY” and “SELL” means in Forex
As I mentioned before the forex market is just like any other market in which you have buyers and sellers but what is being bought or sold in this market is not goods or services, it is currencies that are being bought or sold.
In a regular market if you buy goods in order to dispose of these goods you will have to sell. You can either sell at a profit, i.e you sell for a price higher than what you bought at or you can either sell at a loss, i.e you sell at a price lower than what you bought.
The forex market is no different. If you predict that the market will be going up you will have “BUY” in order to benefit from this move. In order to get out of this BUY POSITION you will have to SELL.
As mentioned above, in order to get out of your BUY POSITION you can SELL at a profit if the market goes in your direction, in forex you would place what is know as a LIMIT ORDER (TAKE PROFIT) at the price in which you want to get out of this BUY POSITION to make a profit.
On the other hand you can SELL at a LOSS if the market does not go in your predicted direction. In forex, you would place what is known as a STOP LOSS OR STOP ORDER at the price at which you want to get of of this BUY POSITION thus making a loss.
See diagram below that demonstrates how this would be represented on a chart.
YOU NEED TO PAY CAREFUL ATTENTON TO THIS
Not only can you make money when the market is going up in forex, you can also make money when the market is going down. CAN YOU BELIEVE THIS!!!!!! WOW! This is what can be confusing to new forex traders.
In order to benefit from the market when it is going down, instead of buying first you will have to SELL first.
In order to get out of this SELL POSITION you will have to BUY.
If the market goes down in your favor you will BUY to get out of this SELL POSITION thus making a profit. The price which you set to exit the market is called your LIMIT ORDER (TAKE PROFIT) in forex.
If the market goes against you, that is, it goes up you will still have to BUY to get out of your SELL POSITION. You will then make a loss. The price which you set to exit the market is called your STOP LOSS. It’s basically the opposite to what happens when you are in a BUY Position.
See diagram below that shows how this will look on a chart.
What is an Entry Order?
An entry order is one that allows you to open a position in the forex market. You can either open a BUY POSITION if you think the market is going up or you can either open a SELL POSTION if you think the market is going down.
There are three types of entry orders, they are:
- Market orders
- Limit orders or Limit
- Stop orders or Stop loss or stop order loss
What is a Market Order?
A MARKET ORDER is an order that allows you to get into the market at the current price at this point in time. Therefore you will either press your BUY or SELL button to open a position.
PLEASE NOTE! THE POSSIBILITY EXISTS THAT YOUR ORDER MANY NOT BE FILLED OR PARTIALLY FILLED BASED ON THE LIQUIDITY OF THE MARKET AT THAT POINT IN TIME.
PLEASE NOTE! BEFORE YOU PLACE YOUR MARKET ORDER OR ANY ORDER AT ALL YOU NEED TO FIRST CALCULATE YOUR RISK AND DETERMINE YOUR POSITION/LOT SIZE.
What is a Limit Order?
Unlike a market order a LIMIT ORDER is an order that allows you to enter the market at a price that you want. It is an order that you set to SELL above the current market price (SELL LIMIT ORDER) or an order for you to BUY below current market price (BUY LIMIT ORDER)
What is a Stop Order?
Unlike a market order a STOP ORDER is an order that allows you to enter the market at a price that you want. It is an order that you set to SELL below the current market price (SELL STOP ORDER) or an order that you set to BUY above the current market price (BUY STOP ORDER)
PLEASE NOTE! IF YOUR LIMIT ORDER IS REACHED YOUR POSITION WILL BE CLOSED AND AS A RESULT YOUR STOP ORDER THAT IS LINKED TO THAT SAME POSITION WILL AUTOMATICALLY BE CLOSED AS WELL.
ON THE OTHER HAND IF YOU STOP ORDER IS REACHED YOUR POSITION WILL BE CLOSED AND AS A RESULT YOUR LIMIT ORDER THAT IS LINKED TO THE SAME POSITION WILL AUTOMATICALLY BE CLOSED AS WELL. See table below showing stop and limit entry orders.
STOP AND LIMIT ENTRY ORDERS
| Buy/Long Position | Sell/Short/Go Short | |
| Above Current Price | Buy Stop Order | Sell Limit Order |
| Below Current Price | Buy Limit Order | Sell Stop Order |
The MT4 platform used the orders above.
An easy way to remember is as follows:
Need to place an entry order above current price – just remember this – BS SL
Need to place and entry order below current price – just remember this – BL SS.
BS stands for buy stop
SL stands for sell stop
BL stands for buy limit
SS stands for sell stop
PLEASE NOTE! ONCE YOU HAVE A POSITION THAT IS OPENED WHICH CAN EITHER BE A BUY OR SELL POSITION, THE LIMIT AND STOP ORDER S THAT ARE LINKED TO THIS POSITION ARE USED AS EXIT ORDERS, THAT MEANS THESE ORDERS ALLOWS YOU TO GET OUT OF THAT POSITION.
THE ORDERS THAT ARE IN THE TABLE ABOVE IS WHAT YOU WILL USE TO ENTER THE MARKET AT YOUR PREDETERMINED PRICE AND NOT AT THE CURRENT MARKET PRICE.
Now that you have an understand of the information above you can open a live account to see how price behave in live market conditions. You can then fund the account when you think you are ready to trade as forex carries a high risk. Opening a live account will give you access to everything that is happening in the live markets. Some demo accounts don’t give you access to all information. You can do this by clicking on the banner below or at the top of this page. Note – each platform has it’s own training material relating to the platform, therefore, you will need to go through the trading platform training to fully understand how the platform works.