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Struggling to understand limit orders

  • #1
  • First Post: Jan 15, 2013 8:52am Jan 15, 2013 8:52am
Hi! I am still a relative newbie to understanding all the ins & outs to placing Forex trading orders.

Often I have opened a Buy/Sell Stop order at the market price; set my TP at a multiple of the (Entry - Stop Loss) value and have seen from later results that if I had been able to close part of the order along the way I would have been able to consolidate my profit - which I have been told is the function of a Jumping Stop.

Recently an overheard comment; " Just set a Buy/Sell stop order and then open pending limit orders to close part of the trade at various levels of profit." caught my interest because, until that minute, I had no idea that such a thing was possible.

Can anyone clue me in one way or the other please?

Thanks.
Much appreciated
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  • #2
  • Jan 15, 2013 9:25am Jan 15, 2013 9:25am
Quoting Aussiedoc
Hi! I am still a relative newbie to understanding all the ins & outs to placing Forex trading orders.

Often I have opened a Buy/Sell Stop order at the market price; set my TP at a multiple of the (Entry - Stop Loss) value and have seen from later results that if I had been able to close part of the order along the way I would have been able to consolidate my profit - which I have been told is the function of a Jumping Stop.

Recently an overheard comment; " Just set a Buy/Sell stop order and then open pending limit orders to close part of the...
You can enter a trade with, lets say two standard lots. A common strategy is to close half the trade and move the stop to the entry price once the trade has reached 1/1 risk to reward. This accomplishes two objectives, it gives the trader a free trade and it helps to smooth the trader's equity curve.

Typically a solid trading strategy will show a lesser profit when applying this strategy. It will generally result in larger profits over the long run if sticking with the whole position until the target is reached. You will take a full loss with the whole position when stopped out so taking lots of half profits will lower the expectancy of the trading method unless it was part of the construction of the method.

If you want to employ this strategy here is how.

your original trade is a sell for two standard lots
Stop is twenty pips target is sixty
When the trade reaches twenty pips profit exit half. You can do this manually or at the time of trade entry place a limit buy for half the position (one standard lot). You may then move the stop if you wish.
  • #3
  • Jan 15, 2013 11:10pm Jan 15, 2013 11:10pm
Quoting Seneca pilot
If you want to employ this strategy here is how.

your original trade is a sell for two standard lots
Stop is twenty pips target is sixty
When the trade reaches twenty pips profit exit half. You can do this manually or at the time of trade entry place a limit buy for half the position (one standard lot). You may then move the stop if you wish.

Mate, you are a legend! An answer that makes sense in a few words. Thanks very much!
Attitude! Attitude! Attitude! There is nothing in Life but Attitude!
  • #4
  • Jan 16, 2013 3:44am Jan 16, 2013 3:44am
Quoting Seneca pilot
You can enter a trade with, lets say two standard lots. A common strategy is to close half the trade and move the stop to the entry price once the trade has reached 1/1 risk to reward. This accomplishes two objectives, it gives the trader a free trade and it helps to smooth the trader's equity curve.

Typically a solid trading strategy will show a lesser profit when applying this strategy. It will generally result in larger profits over the long run if sticking with the whole position until the target is reached. You will take a full loss with...
Doesn't that depend on what platform you are trading from?
On many platforms placing a limit buy for half the position will simply open a new position and leave the original full position open. So you will be incurring double the spread expense.
You will also find that some brokers will not allow the opening of another position in the opposit direction of the original position as this will be considered hedging. With these brokers, the trade will not be filled.
Depending on your broker, it may be better to open 2 positions, One with the full TP and 1 with half TP. Of course, you would need to be at the computer to move the SL on the remaing position.
Please Do Not PM Me With Coding Enquiries
  • #5
  • Jan 16, 2013 4:25am Jan 16, 2013 4:25am
Quoting Aussiedoc

Recently an overheard comment; " Just set a Buy/Sell stop order and then open pending limit orders to close part of the trade at various levels of profit." caught my interest because, until that minute, I had no idea that such a thing was possible.
Take Profit is a limit order. That's what they meant in the quote. Limit orders have zero slippage, you should also enter markets with limit order and not stop. Stop loss is always a stop order, because it needs to allow slippage otherwise you won't get a fill and your trade won't get closed.

Limit Orders are not what you think they are as it seems you only associate them with that partial take profits. They are just normal orders.

https://www.tradingtechnologies.com/...T_MDTrader.bmp

This is a depth of market and you see the amount of (stocks e.g.) available for each price (price is grey, the number of stocks or lots are red and blue). All those are limit orders. They just sit in the market until the price gets to them and somebody sells or buys into them and gets you filled.
I found a penny today. That's +100 pips for me.
  • #6
  • Last Post: Jan 20, 2013 7:31pm Jan 20, 2013 7:31pm
Sorry it has taken so long to post this reply. Unfortunately I have been rather sick these past few days.

Heartfelt thanks to everyone who took the time to answer my question re limit orders.

Take care now!

Doc
Attitude! Attitude! Attitude! There is nothing in Life but Attitude!
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