How to use the Metatrader orders

Market Analysis

Introduction

The following information will assist the beginning forex trader on how to place a buy or sell order for a currency pair using the MetaTrader4 trading platform. When placing a buy or sell order, there are several inputs required and each of the inputs will be discussed and explained in this section. There are two types of order executions to place, an “Instant Execution” and “Pending Order”.

Instant Execution – An instant execution is a buy or sell order that is executed once the buy or sell order is placed.

Pending Order – A pending order is a future buy or sell order that is executed when the buy or sell currency price is reached. As an example, if the current currency pair price is 1.5309 and a pending order sell stop is placed at 1.5295 the order will be executed automatically once the currency price drops to 1.5925.

The following will discuss how to place an “Pending Order”. The “Instant Execution" order will be discussed in another HubPage titled “How to Execute an Instant Order”. The following will sections will explain each input of the Pending Order when the Order menu is displayed.

Executing a Pending Order

There are several methods of placing a Pending Order but the easiest method is to first have on the screen the currency pair to be traded. With the currency pair to be traded on the screen left Click on the “New Order” button in the toolbar at the top of the chart. The “Order” menu will appear. The following will discuss each input item of the “Order” menu.

Symbol

Confirm the currency in the window is the currency pair to be traded. If it is not, left click on the “Down Arrow” and left click on the currency pair to be traded.

Volume

The volume equates to the dollar amount to be used when placing an order which equates to the dollar amount movement per pip. A volume is also called the “Lot Size”. A “Standard Lot” has a volume of 1 which equates to $100,000 dollars. Therefore, if a volume of 1 was placed in the window, $100,000 will be used in placing an order for the currency pair selected. To change the dollar amount used to place an order, change the volume size. To arrive at the new dollar amount when the volume changes to a number other than 1, simply multiply $100,000 by the new volume amount. As an example, if a volume of .1 is used the dollar amount will be $10,000 ($100,000 * .1 = $10,000). If the volume used is .3 the dollar amount used will be $30,000 ($100,000 *.3 = $30,000). Therefore, to calculate the dollar amount used in each trade multiply the volume amount by $100,000.

Once the dollar amount used to execute the trade is known the dollar amount per pip movement can be calculated. The amount per pip movement will depend on whether the US Dollar (USD) is the primary or secondary currency of the currency pair. As a reminder, with a currency pair the first currency listed is the primary currency and the second currency listed is considered the secondary currency. For example, with the currency pair EUR/USD, the EUR is the primary currency and the USD is the secondary currency. With the currency pair USD/JPY, the USD is the primary currency and the JPY is the secondary currency.

To calculate the dollar amount per pip with the USD as the secondary currency multiply the dollar amount used to execute the trade by .0001 (1 pip movement). As an example, for a volume of .1 which equates to $10,000 the resulting dollar amount per pip movement will be $1.00 ($10,000 * .0001 = $1.00). For a standard lot of 1 which equals $100,000, the dollar amount per pip movement will be $10.00 ($100,000 * .0001 = $10.00).

To calculate the dollar amount per pip with the USD as the primary currency multiply the dollar amount used to execute the trade by .0001 (1 pip movement) and then by the exchange rate based on the opening price. As an example, for a USD/CAD currency price of 1.0162, a dollar amount used of $10,000 (volume = .1) the dollar amount per pip movement will be $0.98 ($10,000 * .0001 * 1/1.0162 = $0.98). For a standard lot of 1 which equals $100,000, the dollar amount per pip movement will be $9.84 ($100,000 * .0001 * 1/1.0162 = $9.84).

If the Japanese yen (JPY) is the secondary currency use .01 for 1 pip movement. As an example, for a USD/JPY currency price of 90.12, a dollar amount used of $10,000 (volume = .1) the dollar amount per pip movement will be $1.11 ($10,000 * .01 * 1/90.12 = $1.11). For a standard lot of 1 which equals $100,000, the dollar amount per pip movement will be $11.10 ($100,000 * .01 * 1/90.12 = $11.10).

The volume amount is VERY important since it is the main driven force in money management. The amount of the volume to use is based the amount of money in your margin account, risk level management, and the trading strategy used.

Stop Loss

A stop loss is a pending execution order used to automatically close out a losing trade. A stop loss is a technically placed pending order to take the emotion out of making a decision on when to close a losing trade and as a money management tool.

If a sell order is placed the stop loss price will be placed above the entry price and once the stop loss price is met the order is executed and a loss posted. As an example, if the opening sell price is 1.3535 and stop loss is placed at 1.3555, the stop loss will be executed when the price equals 1.3555, resulting in a 20 pip loss. Typically the stop loss must be at least 3 pips above the entry price of a sell order. As an example, for a sell entry price of 1.5242 the stop loss order must be greater than 1.5245.

If a buy order is executed the stop loss price will be placed below the entry price and once the stop loss price is met the order is executed and a loss posted. As an example, if the opening buy price is 1.3535 and stop loss is placed at 1.3505, the stop loss will be executed when the price equals 1.3505, resulting in a 30 pip loss. Typically the stop loss must be at least 3 pips below the entry price of a buy order. As an example, for a buy entry price of 1.5242 the stop loss order will be less than 1.5239.

The strategy on where to place a stop loss order price will vary from trader to trader. Recommend finding a proven trading system and utilized the strategy taught.

Take Profit

A take profit is a pending execution order used to close out a profitable trade. A take profit is a technically placed pending order to take the emotion out of making a decision on when to close a profitable trade. It may sound crazy wanting to close out a profitable trade but without the take profit set at a technically sound location greed can have an over powering affect and before you know it the profit can become a loss quickly.

If a sell order is placed the take profit price will be placed below the entry price and once the take profit price is met the order is executed and a profit posted. As an example, if the opening sell price is 1.3575 and take profit is placed at 1.3600, the take profit will be executed when the price equals 1.3600, resulting in a 25 pip profit. Typically the take profit must be at least 3 pips below the entry price of a sell order. As an example, for a sell entry price of 1.5242 the take profit order must be less than 1.5239.

If a buy order is executed the take profit will be placed above the entry price and once the take profit is met the order is executed and a profit posted. As an example, if the opening buy price is 1.5015 and take profit is placed at 1.5030, the take profit will be executed when the price equals 1.5030, resulting in a 15 pip profit. Typically the take profit must be at least 3 pips above the entry price of a buy order. As an example, for a buy entry price of 1.5242 the stop loss order will be less than 1.5245.

The strategy on where to place a take profit order price will vary from trader to trader. Recommend finding a proven trading system and utilized the strategy taught.

Comments

The comment section is used to make any notes of use for the trader. When the order is placed a copy of the order can be printed out with the note.

Type

There are two order types, an Instant Execution and Pending Order. The Instant Execution type is the default entry, therefore left click on the down arrow and left click again on "Pending Order. A Pending order menu will appear on the screen.

Pending Order Menu

The following will discuss each of the four items on the Pending Order Menu:

Type

- The Type will be the type of pending order to place. There are four Pending Order types to choose from. The four types are, sell stop, sell limit, buy stop, and buy limit. Each can be seen by left clicking on the down arrow.

A limit and a stop order are very similar in that when the price set for a limit and stop order is met the trade will be executed immediately. The difference bewteen the two is with a stop order you are expecting the price movemnt to continue in one direction, hit the stop price, order is executed, and price movement continues in the same direction. With a limit order you are expecting the price movement to go past the limit order price, reverse, and hit the limit order price a second time. It is after the reversal and hitting of the limit order price the second time is when the order is executed. Limit orders are primarily set when there is a support or resistant level in which the price is expected to hit the support or resistant level and reverse.

The following will be example of each of the four types of pending orders:

Sell Stop

Example: The current price is 1.5015 and a sell stop is placed at 1.5005. As the price drops from 1.5015 to 1.5005 a sell order is executed.

Sell Limit

Example: The current price is 1.5015 and a sell limit is placed at 1.5025. As the price rises from 1.5015 and goes beyond 1.5025 and then reverses back to 1.5025 a sell order is executed.

Buy Stop

Example: The current price is 1.5015 and a buy stop is placed at 1.5025. As the price rises from 1.5015 to 1.5025 a buy order is executed.

Buy Limit

Example: The current price is 1.5015 and a buy limit is placed at 1.5005. As the price drops from 1.5015 and goes beyond 1.5005 and then reverses back up to 1.5005 a buy order is executed.

With each of the four order types the limit or stop order price must differ by four pips from the market price at the time the order is placed.

At Price

The "At Price" is the price set for any one of the four limit or stop order type.

Expiry

The "Expiry" is a date in which the type of pending order placed will expire if the order is not met.

Place

After all the above information is entered, the "Place" button will place the Pending Order.

Conclusions

The placing of a Pendng Order occurs when the trader has confirmed the indicators used in evaluating a trade opportunity are in agreement. With the indicators in agreement the probability of a profitable trade is increased. The key in placing an order with the probability of the trade being profitable is to find a proven trading strategy that is not only successful but the teacher is a mentor that will trade with you each day.