Inside Trade | Pending Orders

Most newbie traders should learn about pending orders consequently after learning how to open positions. But what are pending orders?

Pending orders are commitments from the client to a broker to buy or sell a security after a predefined price had been reach in the future. It is basically used in opening a position, either a buy or sell, after the current price reached a certain level. There are four types of pending order: Buy Limit, Buy Stop, Sell Limit, Sell Stop.

Buy Limit – an order to open a buy position once the predefined value has been reached. The predefined value is the “ASK” price. It anticipates that after the current price falls and reached a certain, it will start to increase again. It allows traders to give a specific price in which they are willing to open a buy position.

Buy Stop – an order which will open a buy position once the predefined value has been reached. The predefined value is the “ASK” price. It anticipates that after the current price reached a certain level, it will continue its current direction. It hopes to ride a momentum of a bull trend.

Sell Limit – the concept of sell limit order is the same as its “Buy” counterpart. But, the only difference is their predefined value and their direction. In sell limit order, a sell position will be opened once the predefined value has been reached. This time, the predefined value is the “BID” price. It anticipates that after the current price reached a certain level, it will start to fall. Triggering the order in the process.

Sell Stop – the concept of sell stop order is almost the same with its “Buy” counterpart. It anticipates that after the predefined value has been reached, will keep on falling.