What are pending orders?

What are pending orders?

Modern trading platforms such as MT4 and MT5 support two types of trading orders: market and pending orders. An order is the trader's instruction for the brokerage company to conduct a trade operation.

Market orders instruct the broker to buy or sell a financial asset, which is executed at the current Ask and Bid prices.

Pending orders instruct the broker to buy or sell a financial asset in the future when the specified conditions are met.

Types of pending orders

There are several types of pending orders:

Buy Limit opens a buy trade at the Ask price equal to or lower than the current price. Usually, such orders are placed in the expectation that the price of an asset, after dropping to the support level set in the order, will reverse and begin to grow.

Sell ​​Limit opens a sell trade at the Bid price equal to or greater than the current price. Usually, such orders are placed in the expectation that the price of an asset, after growing to the resistance level set in the order, will reverse and begin to decline.

Suppose a trader, through market analysis, came to the conclusion that in the next few hours the price of the AUDNZD pair after a long downtrend,will most likely reverse and begin to grow. The current price level is 1.07800. The trader places a Buy Limit pending order at 1.07780, 20 points below the current price in the oversold zone. They expect that the Ask price will continue to fall for some time and reach 1.07780. The pending order will be triggered and a long position will be opened. Then the price will start to rise and the open position will become profitable. Sell ​​Limit is similar to the Buy Limit order. The trader expects the price to fall after reaching the set Bid level. Sell ​​Limit is a signal to open a short position.

Support level is a level below the current rate, where presumably the rate can reverse up.

Resistance level is a level above the current rate, where presumably the rate can reverse down.

Buy Stop opens a buy trade at the Ask price equal to or greater than the current price. Usually, such orders are placed in the expectation that the price of an asset will overcome the resistance level set in the order and continue to rise.

Sell ​​Stop opens a sell trade at the Bid price equal to or lower than the current price. Usually, such orders are placed with the expectation that the asset price will overcome the support level set in the order and continue to fall.

When the trader expects the resistance level to be broken, they can place a Buy Stop. For example, after conducting a technical analysis of the AUDNZD chart, a trader placed an order at a price of 1.07980. The price continues to grow and upon reaching the level of 1.07980, a buy position is opened. A breakdown of the resistance level signals the beginning of an upward market trend. Sell ​​Stop orders are placed in anticipation of a breakout of the support level. Due to the downward dynamics of the market, the trader expects to profit from an open short position.

Buy Stop Limit is an order that combines Buy Stop and Buy Limit. As soon as the future Ask price reaches the Buy Stop level specified in the Price field, a pending Buy Limit order will be placed at the level specified in the Price Stop Limit field. Buy Stop is placed above the current Ask price, and the Buy Limit price is placed below the set Buy Stop price.

Sell ​​Stop Limit is an order that combines Sell Stop and Sell Limit. As soon as the future Bid price reaches the Sell Stop level specified in the Price field, a pending Sell Limit order will be placed at the level specified in the Price Stop Limit field. Sell ​​Stop is placed below the current Bid price, and the Stop Limit price is placed above the set Sell Stop price.

In other words, Buy Stop Limit is an order to place a Buy Limit upon reaching the set Buy Stop price. This type of order is used if a trader intends to open a buy trade in the future, when the price bounces off the resistance level, but at the moment the price is growing. For example, the current AUDNZD price is 1.07800. The trader sets Buy Stop at 1.07830 and Buy Limit at 1.07810. As soon as the Ask price reaches 1.07830, the terminal will automatically set the Buy Limit at 1.07810. Sell Stop Limit is basically the opposite of Buy Stop Limit. The trader plans to activate a pending Sell Limit order at the moment when the price reaches the set Sell Stop support level.

How to place a pending order?

In order to place a pending order, you need to click New Order in the trading platform window.

Then select the Order Type - Pending Order. At the bottom, in a new window, select the type of pending order and click Place.

It is not necessary to use pending orders, but they were specially designed for the convenience of traders. Pending orders are great for testing various trading strategies. For broader trading opportunities, every novice trader should know how and when to use pending orders.