In any kind of trading there will be ORDER which broker completes for you. If you want to buy/sell something then you will have two ways to put an ORDER, those two types are DIRECT order and PENDING order.
DIRECT ORDER:
The order which executes instantly when you quote BUY/SELL is instant order or direct order.
- When signal is obtained one can use direct order
- There will some lag in trade execution depending on the broker
- Some brokers provide good services without any lag for premium or big accounts
PENDING ORDER:
Pending order is the order which executes the trade when any of the given condition is qualified.
One should know few terms before knowing about pending order. They are
- BUY LIMIT
- SELL LIMIT
- BUY STOP
- SELL STOP
Let’s divide them into categories LIMIT ORDERS and STOP ORDERS. These two orders are Pending Orders.
LIMIT ORDERS:
Limit order is kind of order which is placed opposite to the trend, whether it is BUY/SELL.
We all know BUY IS UP and SELL IS DOWN. If the price is moving up then it is buy trend, in buy trend if you want to sell you will use SELL LIMIT order. In the same way if you want to buy in down trend/sell trend then you will use BUY LIMIT.
STOP ORDERS:
Stop order is kind of order, which is placed in the current trend, whether it is BUY/SELL.
In a uptrend if you want to buy then you will place BUY STOP. In a down trend, if you want to sell then you will use SELL STOP.
Pending orders or future orders which you expect and quote. After reaching some point the price starts to change its trend then before the price reaching that point you will place an pending order expecting that the price will reach that point.
From the above chart, if you want to sell after the LINE A, then you have to place a sell stop order, because it is in the same trend that is down trend. So Stop orders are used in the same trend and limit orders are used in the opposite trend
Simply one can remember the pending order as “ STOPS ARE USED IN THE SAME TREND”, “LIMITS ARE USED IN OPPOSITE TREND ”.