Understanding the various MT4 order types is crucial for successful trading on the MetaTrader 4 platform. Whether you’re a beginner or an experienced trader, knowing how to effectively use market orders, pending orders, and stop orders can significantly enhance your trading strategy. So, don’t miss out on optimizing your trading experience, explore the different MT4 order types today and elevate your trading game!
MT4 Platform Overview
MetaTrader 4 is one of the most widely used and trusted platforms in the world for forex and contract for difference (CFD) trading. Developed by MetaQuotes Software and launched in 2005, MT4 has maintained its dominance in the market due to its advanced functionality, user-friendly interface, and powerful analytical tools. Here’s an in-depth look at what makes MT4 a go-to platform for traders of all experience levels.
See more:
- Detailed Guide on Downloading and Using MT4 for Beginners
- What is the difference between MT4 vs MT5 trading platform
- What is MT4? What types of MT4 charting tools are there?
- Discover the top 12 popular and effective MT4 indicators
Terms to Know When Entering MT4 Orders
When placing orders on the MT4 order types platform, understanding key terms is essential to executing trades effectively and managing your strategy. Here’s a breakdown of important terms you should know when entering MT4 orders:
Market Order
A market order is an instruction to buy or sell a financial instrument immediately at the current market price. This is the most straightforward order type, often used by traders who want to enter or exit a position quickly.
Pending Order
A pending order is an instruction to buy or sell an instrument at a specified price in the future.
Stop-Loss (SL)
A stop-loss order automatically closes a trade if the market moves against you to a certain price level. It is a risk management tool designed to limit potential losses.
Pip
A pip (Percentage in Point) is the smallest price movement in forex trading. For most currency pairs, a pip represents a movement in the fourth decimal place (0.0001), except for JPY pairs where it is in the second decimal place (0.01).
Spread
The spread is the difference between the bid (selling) price and the ask (buying) price of a currency pair. It represents the cost of the trade and is a key consideration in trading strategies.
Leverage
Leverage allows traders to control a larger position than the actual capital they have in their account. It is expressed as a ratio, such as 100:1, meaning you can trade $100,000 in the market with only $1,000 in margin.
Margin
Margin is the amount of money required to open and maintain a leveraged position. When you enter a trade, a portion of your account balance is set aside as the margin.
Slippage
Slippage occurs when an order is executed at a price different from the requested price, typically during periods of high volatility or low liquidity.
Common MT4 Order Types
MetaTrader 4 (MT4) provides traders with various types of orders to execute their trading strategies more effectively. Each type of order offers a unique way to interact with the market, giving traders flexibility in managing their positions. Here’s a detailed overview of the most common MT4 order types:
Buy Limit Order
A buy limit order is a pending order to buy an asset at a price lower than the current market price. Traders use this when they expect the price to drop to a certain level before it rises again. This allows the trader to enter the market at a more favorable price.
- Example: If EUR/USD is trading at 1.1800 but you believe it will drop to 1.1750 before rising, you can place a buy limit order at 1.1750. The order will only be executed if the price reaches or drops below 1.1750.
Sell Limit Order
A sell limit order is a pending order to sell an asset at a price higher than the current market price. Traders use this type of order when they expect the price to rise to a certain level before falling. It allows traders to sell at a better price than the current one.
- Example: If EUR/USD is trading at 1.1800 and you believe it will rise to 1.1850 before falling, you can place a sell limit order at 1.1850. The order will only be executed if the price reaches or exceeds 1.1850.
Buy Stop Order
A buy stop order is a pending order to buy an asset at a price higher than the current market price. Traders use this when they expect the price to continue rising after reaching a certain level, ensuring that they enter the market as it gains upward momentum.
- Example: If EUR/USD is trading at 1.1800 but you believe it will break through a resistance level and continue rising above 1.1850, you can place a buy stop order at 1.1850. The order will only execute once the price reaches or surpasses that level.
Sell Stop Order
A sell stop order is a pending order to sell an asset at a price lower than the current market price. This is typically used when traders expect the price to continue falling after breaking a certain level, allowing them to enter the market during a downtrend.
- Example: If EUR/USD is trading at 1.1800 but you expect it to fall further if it breaks below 1.1750, you can place a sell stop order at 1.1750. The order will be executed once the price drops to or below that level.
Stop-Loss Order
A stop-loss order is not a standalone order type but an add-on to existing positions (market or pending orders). It automatically closes a trade when the market moves against you by a certain amount, helping limit potential losses. It’s a crucial risk management tool used by almost all traders.
- Example: If you buy EUR/USD at 1.1800 and set a stop-loss at 1.1750, your trade will automatically close if the price drops to 1.1750, limiting your loss.
Take-Profit Order
Similar to a stop-loss, a take-profit order is also an add-on to existing positions. It automatically closes a trade when the market reaches a certain profit level, allowing you to lock in gains without needing to constantly monitor the market.
- Example: If you buy EUR/USD at 1.1800 and set a take-profit at 1.1850, your trade will close automatically when the price hits 1.1850, securing your profit.
How to Enter Orders on MT4
Here is a step-by-step guide on how to enter an order on MT4:
- Step 1: To start the order window, press F9 or click “New Order” on the toolbar. Then right-click on the chart and select “New Order”.
- Step 2: Select your desired trading instrument from the “Symbol” drop-down list.
- Step 3: Select “Market Execution” for immediate trades or “Pending Order” for future trades.
- Step 4: This step is quite important, place your market order carefully and thoroughly. Set the volume and then optionally add “Stop Loss” and “Take Profit”. Continue to click “Market Buy” or “Market Sell”.
- Step 5: Wait for the order and then select the 4 items you want including “Buy Limit”, “Sell Limit”, “Buy Stop” or “Sell Stop”. Once selected, set the entry price and volume and then click “place”.
- Step 6: Finally, monitor, modify as you wish or close the order in the “terminal” window under the “trade” tab and you are done.
Common Mistakes When Entering MT4 Orders
When entering orders on the MetaTrader 4 (MT4) trading platform, it’s common for MT4 order types traders, especially beginners, to make certain mistakes. Here’s a list of common mistakes and how to avoid them:
- Using the Wrong Order Type: Confusing market orders with pending orders. For instance, placing a market order when you intend to set a pending limit or stop order.
- Incorrect Lot Size: Entering the wrong lot size can lead to over-leveraging or under-sizing trades, increasing the risk or reducing potential profit.
- Failure to Set Stop Loss and Take Profit: Many traders either forget or intentionally avoid setting a stop loss and take profit levels, leading to emotional decision-making.
- Incorrect Stop Loss and Take Profit Levels: Setting the stop loss too tight or too far can lead to premature exits or excessive risk exposure. Similarly, setting a take profit too far may result in missing realistic profit targets.
- Not Accounting for Spread: Failing to account for the spread (the difference between bid and ask prices) can result in orders being triggered too early or not at all.
- Over-Trading: Placing too many orders at once can result in losing control over your portfolio and increase exposure to risk.
- Improper Use of Leverage: High leverage magnifies both potential profits and losses. Over-leveraging can wipe out an account quickly if the trade moves against you.
- Forgetting to Check Expiration on Pending Orders: Forgetting to set an expiration date for pending orders can result in orders being triggered unexpectedly after market conditions have changed.
- Wrong Symbol Selection: Entering an order on the wrong symbol (e.g., trading EUR/USD when you intended to trade GBP/USD).
FAQ – Frequently Asked Questions When Entering MT4 Orders
Here’s a comprehensive FAQ section addressing common questions related to entering orders on the MetaTrader 4 (MT4) platform:
How can I check my account’s margin and free margin?
- Your account’s margin and free margin can be viewed in the “Trade” tab at the bottom of the MT4 platform. The margin level is essential for understanding how much of your equity is available to open new trades without risking a margin call.
Is it possible to place multiple orders at once?
- Yes, you can place multiple orders simultaneously in MT4. However, ensure you have a clear plan and adequate risk management to avoid over-leveraging your account.
Can I cancel a pending order after it has been placed?
- Yes, you can cancel a pending order at any time before it gets executed. Right-click on the pending order in the “Trade” tab and select “Delete.”
What is the minimum lot size I can trade?
- The minimum lot size varies by broker and the trading instrument. Most brokers allow micro lots (0.01 lots), but check your broker’s specifications for exact details.
Conclusion
In conclusion, mastering the different MT4 order types is crucial to optimizing your trading strategy on the MetaTrader 4 platform. By understanding market orders, pending orders, and stop orders, you can effectively manage your risk and improve your trading results. Start exploring these order types today to improve your trading skills! Don’t hesitate any longer, dive into the world of MT4 and improve your trading success now!
