Forex Trading Forex Trading Orders and Execution 2 — Questions and Answers
Question 1: What is a 'buy stop' order used for in Forex?
- To buy a currency pair below the current market price
- To buy a currency pair above the current market price once a level is broken (Correct answer)
- To stop a buy order from executing
- To hedge a short position
Correct answer: To buy a currency pair above the current market price once a level is broken
A buy stop order is placed above the current market price and triggers a buy when the price rises to that level, often used to enter breakout trades.
Question 2: What is a 'sell limit' order in Forex?
- An order to sell at or above the current market price at a specified level (Correct answer)
- An order to sell immediately at the market price
- An order that limits how many trades can be placed per day
- An order placed below current price to enter a short
Correct answer: An order to sell at or above the current market price at a specified level
A sell limit order is placed above the current market price and executes when the price rises to the set level, allowing traders to sell at a better price.
Question 3: What causes 'requotes' in Forex order execution?
- Broker fraud
- Market price moving away from the requested price before the order is filled (Correct answer)
- Low leverage on the trading account
- A technical error in the trading platform
Correct answer: Market price moving away from the requested price before the order is filled
Requotes happen when the market price changes between order submission and execution, and the broker offers a new (different) price instead of filling the original order.
Question 4: What is 'order execution speed' important for in Forex trading?
- It determines the trader's tax rate
- Faster execution reduces slippage and ensures trades fill near the desired price (Correct answer)
- It affects the size of the spread charged by the broker
- It only matters for algorithmic traders
Correct answer: Faster execution reduces slippage and ensures trades fill near the desired price
Fast order execution is critical in Forex because prices change rapidly, and delays can result in slippage — getting filled at a worse price than expected.
Question 5: What is a 'pending order' in Forex?
- An order already executed and waiting to be settled
- An order set to trigger automatically when the market reaches a specific price (Correct answer)
- An order placed by an institutional broker on behalf of a client
- An order that requires manual confirmation before executing
Correct answer: An order set to trigger automatically when the market reaches a specific price
A pending order is pre-set to execute automatically when the market price reaches a specified level, without requiring the trader to be actively watching.
Question 6: What does 'partial fill' mean in Forex order execution?
- When only part of an order is executed due to insufficient market liquidity at the requested price (Correct answer)
- When a broker charges a partial fee for an uncompleted order
- When a trade is split across two currency pairs
- When an order fills over two trading sessions
Correct answer: When only part of an order is executed due to insufficient market liquidity at the requested price
A partial fill occurs when there is not enough liquidity at the specified price to fill the entire order, resulting in only a portion of the trade being executed.
Forex Trading Forex Trading Orders and Execution 2
What is a 'buy stop' order used for in Forex?