Buy limit order plays an important role among the types of pending orders in forex trading. Let’s join Learn Forex Trading to answer questions about buy limit order right in the article below.
What is the buy limit?
Mastering how to apply buy limits brings great benefits by minimizing risks and optimizing profit opportunities. So, what is the buy limit?
What is a buy limit order?
In contrast to the sell limit, this is a means for investors to buy at a lower price than the current level. When the price drops and reaches the point where you placed the order, the long position will be automatically activated.
For example: Suppose the EUR/USD currency pair is trading at 1.11. This is a quite high price and you want to buy at a lower price. However, because you do not have much time to monitor the market, you decide to place a buy-limit order at the price of 1.10. When the price drops by 100 pips, your order will be executed automatically.
See more: Learn sell stop to increase success rate
Meaning of buy limit order
In the list of orders in the forex market, Buy Limit is considered one of the most effective pending orders for investors. The nature of this type of order is shown by the fact that you want to execute a buy order. But the current price is too high. And you expect the price to fall so you buy at a lower price.
However, with you not having enough time to watch the market and wait for the price to drop, using this order becomes important. In this case, using orders intelligently can increase profit opportunities and minimize risks. At the same time, you save the time you have to spend monitoring and waiting for order execution.
Advantages and disadvantages of buy limit on the Forex exchange
Of the four powerful types of pending orders, the Buy Limit is effective when applied properly and based on favorable market analysis.
Advantages on the Forex exchange
There are many advantages that foreign exchange (forex) trading exchanges bring to investors:
- Investors do not need to constantly monitor the market and wait until the price reflects their judgment before placing an order. Instead, they can use automated tools. Or pending orders to automate the trading process. Save time for other activities.
- Forex brokers often offer the possibility of purchasing products at prices lower than the market price. This helps reduce the investor’s initial investment capital. Increase profitability in trading.
- The forex exchange provides an ideal environment for investors to develop patience. Eliminate emotional trading. The use of automation and pending orders helps traders make decisions based on planning and analysis and not on emotions.
These advantages do more than just enhance trading performance. It also helps improve investor experience and results in the foreign exchange market.
Defect
This command is the same stop limit order and buy stop orderWhile trading Forex can bring many benefits, but there are also disadvantages. One of the downsides is that sometimes the price can go up immediately afterward. Or just decrease a little before increasing again without reaching the order trigger level. Therefore, traders may miss out on good order execution opportunities.
When do you need to use buy limit order?
Buy limit pending orders play an important role and bring efficiency in trading. However, it is not always possible to execute pending orders without a specific strategy. Here are some situations where using pending orders is appropriate:
- When the price touches the support or resistance level. This is the ideal time to use buy limit order. Often the price will react and return after exposure to these levels. This makes pending orders useful and potentially profitable.
- When trading signals show that the downtrend will continue. You want to buy into the position at a lower price to optimize profits.
Understanding the situation and applying buy limit orders appropriately is an important part of a successful trading strategy.
How to set buy limit on MT4
Here is a guide to placing a buy limit order on the MetaTrader 4 Forex platform:
Step 1: Open MetaTrader 4 software and select “New Order”. Or open the order window by pressing the shortcut F9.
Step 2: In the order window, select “Pending Order” in the Type section, then select “Buy limit”.
Step 3: Set the following parameters:
- Volume: 0.01 lot (or according to your wishes).
- Price: 1.2037 (target price you want to buy).
- Set up Stop Loss and Take Profit if needed.
After entering the parameters, press the “Place” button to place the order.
For example:
Suppose you want to place a buy order at the price of 1.2037 for the EUR/USD currency pair, with a volume of 0.01 lot:
Step 1: On the EUR/USD chart, press the F9 key to open the order window.
Step 2: Enter the parameters:
- Volume: 0.01
- Price: 1.2037
- Stop Loss and Take Profit can be adjusted if needed.
Step 3: Click “Place” to complete the order placement process.
See more: Instructions for registering an Exness account
Instructions for using buy limit order to trade effectively
As mentioned before, a buy limit order campaign is a very effective method, but to be successful, investors need to have their own strategies and tips when making transactions:
- Use the nail-spreading strategy:
The “spiking strategy” is popular with investors in forex trading because of the ability to buy at low prices without missing out on opportunities. To implement this strategy, you need to place orders in small volumes. Although this method does not help you buy at the best price when the market drops deeply, on the forex exchange, this is a reasonable approach.
- Buy in sideway market conditions:
In sideways market conditions, using tools to support pending trading is very effective. You can place a pending buy order near the support line in the sideway zone, with a take profit order below the resistance line and a stop loss order placed below the support line. Applying this strategy helps increase R: R ratio and optimize profits.
Conclude
Above is the information about buy limit order, Learn Forex Trading hopes you have understood how to use and apply this order most effectively. Understanding and analyzing market fluctuations is an important key to success in trading, not only with buy limit orders but also with all other types of orders. Always learn and accumulate knowledge to enrich yourself.
Questions related to buying limit order
When should I use buy limit pending orders?
Buy limit pending orders are often used when investors expect the price to decrease and want to buy at a lower price than the current level.
What strategies can be applied when using a buy limit pending order?
One of the popular strategies is the “spiking” strategy, in which investors place orders in small volumes at different prices.
How to place a buy limit pending order on the Forex trading platform?
First, you need to open the trading platform and select “New Order” or press the shortcut to open the order window. Then, select “Pending Order” and select the order type as “Buy limit”, then set parameters such as price, volume, stop loss, and take profit before placing the order.