Forex Trading Forex Trading Orders and Execution 1 — Questions and Answers
Question 1: What is a 'market order' in Forex trading?
- An order to buy or sell at a specified future price
- An instruction to execute a trade immediately at the current market price (Correct answer)
- An order that expires at the end of the trading day
- An order placed to hedge an existing position
Correct answer: An instruction to execute a trade immediately at the current market price
A market order instructs the broker to execute the trade immediately at the best available current price, guaranteeing execution but not price.
Question 2: What is a 'limit order' in Forex?
- An order to buy or sell at a specific price or better (Correct answer)
- An order that limits the trader's daily loss
- An order placed automatically by the broker
- An order that caps leverage at a set level
Correct answer: An order to buy or sell at a specific price or better
A limit order is set to execute only at a specified price or better, allowing traders to enter or exit the market at a desired price level.
Question 3: What is a 'stop-loss order' designed to do?
- Lock in profits at a target level
- Automatically close a losing trade at a pre-set price to limit losses (Correct answer)
- Prevent a trade from opening above a certain price
- Notify the trader when the market is trending
Correct answer: Automatically close a losing trade at a pre-set price to limit losses
A stop-loss order automatically closes a trade when the price reaches a specified level, limiting the trader's maximum loss on the position.
Question 4: What is a 'take-profit order'?
- An order to add to a winning position
- An order that closes a trade automatically when a profit target is reached (Correct answer)
- An order to convert profits into a different currency
- An order placed after a loss to recover funds
Correct answer: An order that closes a trade automatically when a profit target is reached
A take-profit order automatically closes a position once the price reaches the trader's profit target, locking in gains without manual intervention.
Question 5: What is a 'trailing stop' order?
- A stop-loss that moves with the market price to protect profits (Correct answer)
- A stop placed behind a support level
- An order that follows another trader's position
- A stop-loss set at a fixed dollar amount
Correct answer: A stop-loss that moves with the market price to protect profits
A trailing stop moves in the direction of a profitable trade by a set distance, locking in gains as the price advances while still limiting downside.
Question 6: What does 'Good Till Cancelled' (GTC) mean for a Forex order?
- The order expires at the end of the trading day
- The order remains active until it is either filled or manually cancelled (Correct answer)
- The order is guaranteed to execute at the set price
- The order is only valid during the New York session
Correct answer: The order remains active until it is either filled or manually cancelled
A GTC order stays active in the market until the specified price is reached and the order fills, or until the trader manually cancels it.
Forex Trading Forex Trading Orders and Execution 1
What is a 'market order' in Forex trading?