What are transaction, position, and order on the Forex market?

What are transaction, position, and order on the Forex market?

These terms often have a similar meaning in articles and posts about Forex trading. However, although related, they are quite different.

A transaction is a single purchase or sale of an asset. When you click on the “BUY” or “SELL” buttons in the terminal, you are making a transaction. After completing the transaction, you have an open position on the Forex market.

An open position is a position that has not yet been covered by a reverse transaction. You are waiting for positive market dynamics for your open position. Let's say after a while you decide to close the position. Then you need to click on the “Close” button in the trading terminal, and the position will be closed with a reverse transaction. The principle of Forex trading is designed in such a way that each of your positions is opened and closed with a transaction.

A closed position is a position for which a reverse transaction was made and the result was fixed.

There are also concepts of a long and short position. A long position is one that was opened with a buy trade (BUY). A short position is one that was opened with a sell trade (SELL).

An order is an instruction to execute an operation to buy or sell an asset at a certain price. When you click on the BUY or SELL button in the trading terminal, you are giving an order to make a transaction to open a position in the market.

“BUY” and “SELL” are simple market orders. Market orders are instructions to buy or sell that are executed at the current Bid or Ask price.

Pending orders are orders that are executed when a certain price is reached, which is specified in the parameters of the order itself. Sell ​​Stop, Sell Limit, Buy Stop, and Buy Limit are pending orders.

Stop orders are instructions that, when executed, make a reverse transaction and the position is closed. These orders are Take Profit and Stop Loss.