Ever wonder why so many traders never enter directly at the current market price, and instead opt for setting buy limit and buy stop orders? Interested in applying buy limit and buy stop orders to your strategy, or maybe you’re wondering why MT4 won’t accept the pending order you set? Here’s a quick rundown on what buy limit and buy stop orders are, and how they can massively increase your profits.
If you want to place a buy order above the current market price, then you need to set a buy stop order. For instance, if USD/JPY is at 110.40 and you want to buy at 110.55, then this is exactly what you need to input through your trading platform.
On the contrary, if you want to place a buy order below the current market price, then you’re looking to set a buy limit order. So if USD/JPY is at 110.40 and you want to buy at 110.25 in the event price moves lower, then you need to set a buy limit order at 110.25.
And so here’s what you’ll do next:
1) Within the Type field, you need to change the order type from Instant Execution to Pending Order.
2) Right below the Type field is a second Type field, containing the following options: Buy limit, buy stop, sell stop, sell limit. Again, if you’re buying when price reaches a higher level, you select Buy Stop. And if you’re buying when price reaches a lower level, you select Buy Limit.
3) You also need to set the number of lots you want to risk for this pending order trade, in addition to the stop loss and target profit levels you would like. Keep in mind, once you place the pending order in MT4, you are unable to modify the lot size, and as the market unfolds you decide you want to increase or or decrease your risk by changing lot sizes, you would need to delete your pending order and create a new one.
4) Make sure you enter the price level you want within the price field. Sounds simple, but this is actually where most traders mess up. Some traders accidentally place buy limit orders at higher price levels or buy stops at lower price points. If this happens, the platform will not accept your pending order.
5) Now just simple select Place and your pending order is now live.