MT4 Trading: Understanding the Stop and Limit Pending Order Feature

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trader-understands

Sometimes when a Forex trader starts using MetaTrader4 (MT4), especially if he has previously used other platforms, there is a level of confusion at the terminology MT4 uses for placing pending orders. So let’s check what the pending order options are for MT4 and straighten out the misunderstandings.

Placing a MT4 Pending Order

This part is very straightforward and it helpful if you are using Forex Signals and plan to place your orders manually, or if you are doing any of your own trading and plan to use this feature.

On the top menu bar of your MT4 platform, there is a button that says "New Order." Just click on it.
new order
Then, a new window will open with the Order options. Just change the symbol to whichever currency pair you are planning to trade, and change the type to "Pending Order".
pending order
Now you'll see the various pending order types: Buy Limit, Sell Limit, Buy Stop, and Sell Stop.
pending order types

Buy Limit

You place a Buy Limit pending order when you plan to buy at a price that is lower than the current market price.

For example, lets say you believe that the USDCHF will increase in value and you want to buy it. Right now the price is 1.0013. You want to get into the trade in the buy direction, but you believe that the market will retrace first. So, you want to wait until the market moves down to 0.9989. So you place a Buy Limit order to buy when the market reaches 0.9989.

Pro: If the market first retraces and then goes long, you were able to get into the trade at a better price.

Con: If the market goes long without retracing, then you missed the opportunity to participate. You also may end up entering a buy trade just as the trend changed to the short direction.

Buy Stop

You place a Buy Stop pending order when you plan to buy at a price that is higher than the current market price.

For example, lets say you believe that the USDCHF will increase in value and you want to buy it. Right now the price is 1.0013. You want to get into the trade in the buy direction, but you believe that the market needs to confirm the buying trend first. So, you want to wait until the market moves up to 1.0035. So you place a Buy Stop order to buy when the market reaches 1.0035.

Pro: You have given the market time to confirm the long trend and you have entered the trade with the opportunity to participate in the long direction.

Con: You may have missed a slightly lower, or better, price to buy if the market continues in the long direction. But the peace of mind that the trend was confirmed first is well worth it.

Sell Limit

You place a Sell Limit pending order when you plan to sell at a price that is higher than the current market price.

For example, lets say you believe that the USDCHF will decrease in value and you want to sell it. Right now the price is 1.0013. You want to get into the trade in the sell direction, but you believe that the market will retrace first. So, you want to wait until the market moves up to 1.0035. So you place a Sell Limit order to sell when the market reaches 1.0035.

Pro: If the market first retraces and then goes short, you were able to get into the trade at a better price.

Con: If the market goes short without retracing, then you missed the opportunity to participate. You also may end up entering a sell trade just as the trend changed to the long direction.

Sell Stop

You place a Sell Stop pending order when you plan to sell at a price that is lower than the current market price.

For example, lets say you believe that the USDCHF will decrease in value and you want to sell it. Right now the price is 1.0013. You want to get into the trade in the sell direction, but you believe that the market will retrace first. So, you want to wait until the market moves up to 1.0035. So you place a Sell Limit order to sell when the market reaches 1.0035.

Pro: You have given the market time to confirm the short trend and you have entered the trade with the opportunity to participate in the sell direction.

Con: You may have missed a slightly higher or better, price to sell if the market continues in the short direction. But the peace of mind that the trend was confirmed first is well worth it.

Stop or Limit?

Weighing the pros and cons, we believe the best trading opportunities use the Buy Stop and Sell Stop feature. We send these signals out daily as Forex Signal alerts to your email, phone and directly to your MT4 platform with our Trade Copier.

 

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