Understanding Order Types: Market Execution and Pending Orders

When you place an order in MetaTrader, you choose a type of your order. To make a well-informed choice, learn more about each order type in this article.

Order types overview

There are two general types of orders that traders use:

Market Execution. This type of order is executed immediately at the best possible price at the time the order is sent. When a trader sends a market execution order, they request to buy or sell the financial asset (currency, commodity, or stock) at the current market price.

Pending Order. This type of order is used when a trader wants to open a trade at a later time when the price reaches a specific level. The trader can predefine the entry, stop-loss, and take-profit levels, and when the price reaches the specified level, the order is automatically executed. Types of pending orders include Conditional Pending Orders, which include: Sell Limit, Buy Limit, Sell Stop, and Buy Stop orders.

When to choose Market Execution?

When a trader wants to execute a trade at the current market price, they use the Market Execution option. Therefore, when they click on the buy or sell button, the trade is executed immediately at the current market price. The spread (i.e. the difference between the bid and ask price) is taken into account too.

When to choose Pending Order?

When a trader wants to execute a trade at a future price that is not the current market price, they use the Pending Order option. There are different types of pending orders, including:

• Buy Limit
• Sell Limit
• Buy Stop
• Sell Stop

Buy Limit

Let’s assume that the USDJPY exchange rate is currently at 144.60 and through market analysis, we found that the price could potentially fall to the level of 135.00 and then rebound. In this case, we have two options: Either we wait for the price to reach this level and execute the trade immediately, or we use the Buy Limit option.

To use the Buy Limit option, we would set the value of the trade within the market. When the price reaches the specified value, the platform will automatically execute the trade, even if the trader is not monitoring the trading platform. It is important to note that the value of the Buy Limit order must be less than the current market price.

Sell Limit

We expect the price to rise to a higher level than the current price, let’s say 150.00, and then fall. In this case, we would place a Sell Limit order within the market. The platform will automatically execute the trade when the price rises to reach the pending order.

It is important to note that the value of the Sell Limit order must be higher than the current market price.

If we wait for the terminal to update after placing a pending order, we will see that the pending orders are displayed at the bottom of the screen. The pending orders will remain in the system until they are executed or canceled by the trader. 

When a pending order is executed, it becomes a market order and is executed at the best available price in the market. If a pending order is canceled by the trader before it is executed, it will be removed from the system and will not be executed.

Buy Stop

Let’s assume that the price is moving upward and approaching a resistance level. If the price fails to break through the resistance level, it is likely to fall, presenting a selling opportunity. However, if the price manages to break through the resistance level, it indicates a high probability that the price will continue to rise. In this case, it is possible to enter a buy order after the price breaks through the resistance level.

If the trader is monitoring the market in real-time, they can quickly execute the buy order when the price breaks through the resistance level. However, if the trader is away from the trading platform, they can place a pending order to buy when the price breaks through the resistance level. This type of pending order is known as a Buy Stop order.

When the price reaches the specified Buy Stop level, the platform will automatically execute the trade as a market order, buying the asset at the best available price. It is important to note that the Buy Stop level should be higher than the current market price.

For example, if the USD/JPY exchange rate is at 144.60 and we expect the price to continue to rise and break through the resistance level at 150.00, we can place a Buy Stop order at a level above the resistance level, such as 150.50. The platform will automatically execute the trade when the price reaches the specified level.

Sell Stop

Similarly to Buy Stop, if we expect the price to fall after reaching a support level, we can place a Sell Stop order at a level below the support level. For example, if we expect the price to fall after reaching a support level of 140.00, we can place a Sell Stop order at a level below the support level, such as 139.50. The platform will automatically execute the trade when the price reaches the specified level.

It is important to note that the Buy Stop order should be placed above the current market price, and the Sell Stop order should be placed below the current market price. This is because the Buy Stop order is used to enter a long position after the price breaks through the resistance level, while the Sell Stop order is used to enter a short position after the price breaks through the support level.

Summary

Here is a short recap of order types available to your in MetaTrader:

• The Market Execution order is used to execute your order immediately at the best possible price.
• The Buy Limit order is used to buy an asset at a price lower than the current market price.
• The Sell Limit order is used to sell an asset at a price higher than the current market price.
• The Buy Stop order is used to buy an asset at a price higher than the current market price after the price breaks through a resistance level.
• The Sell Stop order is used to sell an asset at a price lower than the current market price after the price breaks through a support level.

It is important to note that each type of order has its specific use and should be placed based on the trader’s market analysis and strategy. Pending orders can be useful for traders who cannot monitor the market in real-time, allowing them to enter and exit trades automatically when the price reaches a specified level.

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