Pending order is the client's commitment to the brokerage company to buy or sell a security at a pre-defined price in the future. This type of orders is used for opening a trade position provided the future quotes reach the pre-defined level. - Metaquotes Software Corp.
Pending orders are strategic order types with high rate of accuracy, safety, and profitability if applied correctly. Virtually all successful Forex systems utilize pending orders especially News Trading Systems.
See some of our Trading Strategies that utilizes pending orders - How To Make 40 - 50 Pips Consistently. Basic Method & Advanced Method
You can think of pending orders like traps that are set to take advantage of certain kinds of market patterns, conditions, and price actions.
Before we learn how to place pending orders lets see the different types of pending orders, and what they mean.
Buy Stop — Technically this means place a buy order provided the future "ASK" price is equal to the pre-defined Buy Stop Value. In otherwords this order will only be triggered when price increases or hits the Buy Stop Order Value from below. Buy Stop Orders are set in anticipation that price will continue to go up or change direction and move upwards.
See what happens next
Sell Stop — Unlike the Buy Stop Order, the Sell Stop is used to place a Sell order that would be triggered provided the future "BID" price is equal to the pre-defined value. It is set in expectation that price would fall from a high point or current price level, and would continue to go down.
See what happens next
Buy Limit — This means place a buy order in anticipation that the future "ASK" price would be equal to the pre-defined Buy Limit Order Value. In this case the current price level is higher than the value of the Buy Limit Order when it is placed. Buy Limit Orders are used in expectation that price, having gone down to a certain level, will eventually increase.
Sell Limit — It means Sell an order provided the future "BID" price is equal to the pre-defined value. Here the prevalent price level is lower than the value of the placed Sell Limit Order. Sell Limit Orders are usually placed in anticipation that price having moved consistently upwards to a certain level, will certainly fall.BASIC FACTS & CONDITIONS TO NOTE ABOUT PENDING ORDERS
1. The right market pattern, and conditions must be identified before setting pending orders. E.g Is the market struggling around support/resistance areas? Is the market showing signs of an eventual breakout? Chart patterns, sideways market, Pre-news waiting period, e.t.c. These are some major kinds of market conditions that are right for setting pending orders.
2. Use analytical and trending tools to help as a guide in setting pending orders. This would help you set them at the best points.
3. Setting accurate pending orders is a skill every Forex trader should develop in Forex trading. It requires constant practice, and study of market behaviour. Forex Simulation Tools comes handy here. Use them to study market patterns, and test the best places to set pending orders.
4. It is safer to use scripts like OCO (order cancels order) to prevent whipsaws or reversal spikes during news release when setting pending orders.
5. Use expiry dates to set pending orders less you forget to delete them, and they get triggered later in the future at the wrong time.
6. Prepare your pending orders at least 20 minutes early before the event. You can use the Alert feature in MT4 to set warning alarms that will update you of price movements as the market progresses within the areas of your pending order.
7. Pending orders most often get a better fill than market orders. However due to high volatility, and spread widening by most brokers during news release, you might not get the best price fill.
8. You can set as many pending orders as your platform or broker can take. But do not overload your account to the extent beyond your margin, and money management rules.
9. Using simultaneous BUY Stops and SELL Stops for News Trading is an ideal way of taking advantage of either outcome of the news release.
10. It is quite difficult for "bad" brokers to hunt or manipulate pending orders. The worst scenerio is that they would widen the spread to an abnormal level.
11. Consistently adjust your pending orders as market progresses in order to keep price in a narrow channel. This is very good for breakout strategies.
12. Pending orders are held in the broker's server, and not on the client application (MT4 Platform). So if you close your platform or disconnect from the internet, the order would still be triggered when all conditions are met.
13. The new MT4 Build 509, and MT5 has a One-Click-Order feature, where you can right click on any area of your chart to set pending orders.
Placing pending orders is not difficult as some traders assume. Infact you stand a better chance to modify or cancel a pending order if you later discover your calculations were wrong or if market suddenly changed but the order has not been triggered. You cannot do this with a market order.
Using technical methods or tools is one of the best guides to placing accurate pending orders.
1. You must understand that pending orders works like a trap, hence it should be set in a manner with high anticipation that market would eventually fall into the trap. One of our proprietary trading strategy relies on this concept.
2. Look for best areas where price would eventually breakout, test, or reverse, and give careful space above or below those areas and set the pending order at that location. For example if i anticipate that price would reverse upwards after falling down to a certain price level, i would set a Buy Stop Order 5 or 10 pips above the forcasted price level area where price would likely reverse. The new MT4 Build 509 and MT5 has a One-Click-Order feature, where you can right click on any area of your chart to instantly set pending orders easily.
3. Enter the take profit and stop loss settings in the pending order window. With the new MT4 Build 509 or MT5 you can drag the TP and SL lines directly on your chart to modify their positions.
Resistance and support lines are very good tools that aids setting accurate pending orders. Price tends to rebound or reverse around support and resistance areas. You can take advantage of this by identifying those areas through the use of resistance and support lines. After drawing the line, set your pending orders right at the location of the line. For example if price is likely to bounce off a support line, and move upwards, i would set a Buy Limit Order at the support line in anticipation that price would go up after falling to that level on the support line. For a resistance case (i.e price is hitting a particular level and not going further but rather reversing), I would use a Sell Stop Order to take advantage of it. This means i am anticipating that price would go down after climbing up and reaching the resistance price level or line. The take profit should be set close to the oppposite resistance or support price level. You can also use Pivot Point Indicators or Fibonnaci to determine the Take Profit and Stop Loss Levels.
5. Trendlines
Trendline is another fantastic tool, which you can use to set accurate pending orders. You set the pending orders at the location of the likely breakout areas of the trendline.
Be assured that when you apply these tips, you'll definitely maximize your profits. We appreciate your suggestions and feedback.
Happy Trading.
Be assured that when you apply these tips, you'll definitely maximize your profits. We appreciate your suggestions and feedback.
Happy Trading.
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