Get trading with Deriv MT5: Order types part 2
Welcome back to our course on Deriv MT5! In this lesson, we will continue exploring order types, focusing on order expiration options and risk management tools including Take-Profit and Stop-Loss orders. Mastering these concepts will enhance your trading strategy and provide greater control over your trading activity.
Order Expiration Types
Every order you place can carry an expiration type, defining how long it remains active in the market. Here are the options available on Deriv MT5:
- Good Till Canceled (GTC): This is the default setting for most orders, meaning your order stays active until it is either filled or manually canceled. This is perfect for traders who want their orders to remain in play over an extended period.
- Today: This option restricts your order's validity to the current trading day. Any unfilled orders will be automatically canceled when the market closes, making it suitable for trades you anticipate will occur within the day.
- Specified: With this option, you can set a specific expiration time and date for your order. This is particularly useful for aligning your orders with anticipated market movements or economic events.
- Specified Day: This feature allows you to select a specific day for your order to remain active. The order will be canceled automatically at market close on that day.
Risk Management with Take-Profit and Stop-Loss Orders
Effective risk management is crucial in trading, and this is where Take-Profit and Stop-Loss orders play a vital role.
Take-Profit Order
A Take-Profit order is designed to automatically close your position once the market reaches a predetermined profit level. For long positions, the order is triggered based on the bid price being at or above your specified level.
Example: If you expect the Euro to strengthen against the US Dollar and place a buy order at $1.1250, you can set a Take-Profit order at $1.1300. If EUR/USD reaches this price, your position will automatically close, locking in your profits.
Stop-Loss Order
A Stop-Loss order acts as a protective measure to minimize losses. When the instrument's price reaches the specified level, the Stop-Loss order automatically sells your position. Like Take-Profit orders, the Stop-Loss can be initiated with market or pending orders.
Example: Continuing with the EUR/USD scenario, if you set a Stop-Loss order at $1.1200, this order will trigger if the price falls to that level, closing your position to limit your losses.
Trailing Stop-Loss
In addition to standard Stop-Loss orders, you can also use a Trailing Stop-Loss. This order moves with the market price to secure profits while limiting losses. The stop-loss price is set a certain number of points away from the current price, adjusting upward (or downward) as the market moves favorably.
Example: If you have a buy position on EUR/USD at $1.1250 with a trailing stop of 10 points, your initial stop-loss will be at $1.1240. If the price subsequently rises to $1.1270, your stop-loss adjusts to $1.1260, helping to protect your profits.
Conclusion
By understanding market orders, pending orders, different expiration types, and tools like Take-Profit and Stop-Loss orders, you can enhance your trading strategy and better align it with your risk tolerance and market conditions. With these tools, you’ll manage your trading activities more effectively.
In the next lesson, we'll guide you through the practical steps for placing a trade on Deriv MT5, helping you execute trades with confidence. Happy trading!
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Get trading with Deriv MT5: Order types part 2
Welcome back to our course on Deriv MT5! In this lesson, we will continue exploring order types, focusing on order expiration options and risk management tools including Take-Profit and Stop-Loss orders. Mastering these concepts will enhance your trading strategy and provide greater control over your trading activity.
Order Expiration Types
Every order you place can carry an expiration type, defining how long it remains active in the market. Here are the options available on Deriv MT5:
- Good Till Canceled (GTC): This is the default setting for most orders, meaning your order stays active until it is either filled or manually canceled. This is perfect for traders who want their orders to remain in play over an extended period.
- Today: This option restricts your order's validity to the current trading day. Any unfilled orders will be automatically canceled when the market closes, making it suitable for trades you anticipate will occur within the day.
- Specified: With this option, you can set a specific expiration time and date for your order. This is particularly useful for aligning your orders with anticipated market movements or economic events.
- Specified Day: This feature allows you to select a specific day for your order to remain active. The order will be canceled automatically at market close on that day.
Risk Management with Take-Profit and Stop-Loss Orders
Effective risk management is crucial in trading, and this is where Take-Profit and Stop-Loss orders play a vital role.
Take-Profit Order
A Take-Profit order is designed to automatically close your position once the market reaches a predetermined profit level. For long positions, the order is triggered based on the bid price being at or above your specified level.
Example: If you expect the Euro to strengthen against the US Dollar and place a buy order at $1.1250, you can set a Take-Profit order at $1.1300. If EUR/USD reaches this price, your position will automatically close, locking in your profits.
Stop-Loss Order
A Stop-Loss order acts as a protective measure to minimize losses. When the instrument's price reaches the specified level, the Stop-Loss order automatically sells your position. Like Take-Profit orders, the Stop-Loss can be initiated with market or pending orders.
Example: Continuing with the EUR/USD scenario, if you set a Stop-Loss order at $1.1200, this order will trigger if the price falls to that level, closing your position to limit your losses.
Trailing Stop-Loss
In addition to standard Stop-Loss orders, you can also use a Trailing Stop-Loss. This order moves with the market price to secure profits while limiting losses. The stop-loss price is set a certain number of points away from the current price, adjusting upward (or downward) as the market moves favorably.
Example: If you have a buy position on EUR/USD at $1.1250 with a trailing stop of 10 points, your initial stop-loss will be at $1.1240. If the price subsequently rises to $1.1270, your stop-loss adjusts to $1.1260, helping to protect your profits.
Conclusion
By understanding market orders, pending orders, different expiration types, and tools like Take-Profit and Stop-Loss orders, you can enhance your trading strategy and better align it with your risk tolerance and market conditions. With these tools, you’ll manage your trading activities more effectively.
In the next lesson, we'll guide you through the practical steps for placing a trade on Deriv MT5, helping you execute trades with confidence. Happy trading!
Quiz
What is the purpose of a Take-Profit order?
What is a Stop-Loss order designed to do?
Trade with confidence
