Traders can place different types of orders based on their price preferences, expectations and trading style. Some choose to monitor the charts and place market orders manually, while others are using pending orders that get triggered if price reaches the predetermined point.
Pending order definition
A pending order simply means that an order is placed but has not been executed yet. Once the order gets executed, it becomes a trade.
In Forex, pending orders are placed using limit orders. There are four types of limit orders: Buy Stop, Sell Stop, Sell limit and Buy Limit.
Why is it important for traders to understand the pending order?
- Pending orders will only be executed if the predefined conditions are met.
- Traders that do not have the option of monitoring their trades frequently can benefit from placing pending orders.
- Understanding pending orders in trading can help traders buy or sell currency pairs from predetermined prices.
Pending order explained in more detail
In Forex, orders are generally categorized into market and limit orders. When placing a market order, a trader says: I am buying or selling an asset now at current market price. On the other hand, limit orders only get executed if a price reaches a certain, predetermined level. An obvious downside of pending orders is that the price may rally in the opposite direction and they may never get triggered. However, pending orders are highly used as they enable traders to get into positions from the best levels and with high accuracy.
There are four types of pending orders:
- Buy limit order – an order that instructs to buy the currency at a specified price below the market price
- Buy stop order – an order that instructs to buy the currency once it reaches a specified price above the market price. Buy stops are generally used to trade breakouts upwards.
- Sell limit order – an order that instructs to sell the currency at a specified price above the market price
- Sell stop order – an order that instructs to sell the currency at a specified price below the market price. Sell stops are generally used to trade breakouts downwards.
Depending on the divergence between the market price and the price specified in the pending order, the trade might take very long to be executed or might not be executed at all.
Pending order example in forex trading
Let’s assume that you would like to trade the EUR/USD pair at a specified price. If the pair is trading at 0.9990 and you place a limit buy order at 0.9980, the order will not be executed unless the price of the pair reaches 0.9980. If the condition is not met soon enough, you can cancel the order and focus on finding other opportunities. Keep in mind that, if you leave a pending order without paying any attention after the price fails to go in the predicted direction, it may get triggered later and have unintended consequences.
Main takeaways from the pending order
- All order types other than market orders qualify as pending orders
- Pending orders will not be executed unless the predefined conditions are met
- Pending orders can be canceled at any time free of charge
- Such orders are convenient for traders that cannot monitor their trades frequently
- Pending orders are executed automatically and are highly precise compared to manually placed market orders
FAQs on the pending orders
How does a pending order work in forex?
Placing a pending order gives the broker instructions to buy/sell the currency when specified conditions are met. Pending orders are orders that do not trade the currency at the prevailing market price.
How many pending orders can I place?
The number of orders traders can place simultaneously depends on account type and their broker. There are four different types of pending limit orders: Buy Stop, Sell Stop, Sell limit and Buy Limit.