Hello Traders, I'm Luke from disciplined trader.
This video is part of the trading basics series and in this one we will be looking at how
to enter, exit and manage trade positions using different order types.
Carrying on from the last video, I will be using MT4 as I think this a great platform
for beginners to get to grips with how a charting platform works.
If you haven't seen that video, I will leave a link to it in the description below.
There are three different types of market orders that we are going to look at - an At
Market order, Stop Order and a Limit Order.
You can use these three order types to enter and exit trades in different ways.
So let's start with entering a trade and let's first look at an At Market order.
Basically this order opens a buy or sell position (depending which direction you want to take)
at the current market price.
Let's say for example that I wanted to open a buy position on the FTSE100 and it was currently
trading at 7000.
If I were to open the position with an at market order, I would buy the market at 7000.
Alternatively if I were to open a sell at market order I would sell the market at 7000.
To execute this type of order on MT4 you can click the new order button on the quick bar
at the top of the platform.
This will open a new dialogue box to open a trade.
Simply make sure the correct market is selected in the symbol box, enter the position size
you want to open in the volume box, make sure the type box is set to instant execution and
then press either buy or sell to open your desired position.
You will then see the position on the chart and in the order window at the bottom on the
platform.
You can also you the quick trading buttons on the chart in the top left corner.
If they aren't showing, press the little black arrow to make them appear, then enter the
position size you want to take in the middle box and press either the buy or sell button
to open your desired position at the current market price.
(if you haven't enabled quick trading on MT4, you won't be able to use these buttons.
I show you how to enable quick trading in the previous video).
The next order type you can use to open a trade is a Limit Order.
A limit order enables a trader to enter a buy or sell position above or below the current
market price.
For example, if I wanted to open a buy position on the FTSE100 at 6950 and it was currently
trading at 7000, I could set a buy limit order at 6950 and my broker will enter me into a
buy position IF the price falls to 6950.
Even if I am away from the charts when that happens, the order will be executed on my
behalf.
Alternatively, if I wanted to open a sell position at 7050 and the current price was
7000, I could set a sell limit order at 7050 and my broker would enter me into a sell position
IF the market climbs to 7050.
These orders usually stay valid until they are either executed by the broker or cancelled
by the trader but you can set other expiry criteria if wanted.
To use this type of order on MT4 we again need to use the new order button on the quick
bar at the top of the platform.
This time in the dialogue box that appears, we check the market in the symbol box is correct
and enter our position size as before but we change the type box to pending order.
This provides us with another drop down option from which we select either Buy limit or sell
limit.
We then enter the price we want to the order to be placed at in the at price box below.
Then simply press the place box to execute the order.
If there any problems, an error message will pop up prompting you to correct whichever
information needs amending.
Once the order is executed, you will then see the pending order on the chart and in
the order window at the bottom on the platform.
The other order you can use to enter a trade is a stop order.
Stop orders work in the opposite way to limit orders in that they allow you to open a buy
position at a price higher than the current market price and a sell position at a price
lower than the current market price.
For example, if I thought that the FTSE100 market would make a significant move upwards
if it reached 7010 and it was currently trading at 7000, I could set a buy stop order at 7010
and I would be automatically entered into a buy position when the market reaches that
price.
On the flip side, if I thought the market would make a considerable move down if it
fell to 6980 at it was trading at 7000, I could set a sell stop order at 6980 and I
would be automatically entered into a sell position when the price falls to 6980
To use this type of order on MT4 we do exactly as we did before for the limit order, only
this time when we are selecting an option from the pending order type box we select
either buy stop or sell stop depending on which we want to use.
Again we then enter the price we want to place the order at in the at price box and press
place to execute the order.
Once the order is executed, you will then see the pending order on the chart and in
the order window at the bottom on the platform.
Now let's look at how you can use these same order types to exit a trade.
The first way to exit a position is to simply close it manually.
We do this by using an at market order that we looked at earlier only the opposite of
the order used to open the trade.
So if you had opened a buy position of a particular size at 6980 and the market is now trading
at 7000, you can manually close the trade by executing an at market sell order of the
same size as the buy position.
This cancels out the buy order you opened so you are net flat in the market and would
leave you with a profit of 20 pips.
The reverse can be done to manually close a sell position.
If you had sold instead at 6980 and the market was now trading at 7000, you could execute
an At Market Buy Order to close the position leaving you with a loss of 20 pips.
Usually, a charting platform will have quick way to do this rather than having to actually
execute an at market order opposite to the trade you want to close, but that is essentially
what happens.
So to do this in MT4 we can simply use a quick button that the platform provides us with.
All we need to do is go to the order window, identify the trade we want to close and press
the little cross at the very right hand side of the trade entry line.
This will instantly close our position for whatever profit or loss was showing on the
position before we closed it.
Another way to close a trade is by using what's known as a take profit level.
This is simply a limit order that is used to close an existing position once it has
reached a predefined profit target.
For example, if I entered a buy position on the FTSE100 at 7000 with a view of the price
reaching 7020, I could set a limit order (so a take profit level) to automatically close
the trade for me once the price reaches 7020 for a profit.
It does this by opening an opposite sell position to cancel out the original buy position leaving
you with a profit.
The same can be done for sell positions, so if I entered a sell position at 7000 and was
targeting 6960 as a profit target, I could set a take profit order at 6960 to automatically
close my trade when the price falls to 6960.
To use a take profit order in MT4 we need to go back to the order window and find the
trade we want to add a take profit level to.
Once identified, simply double click on the take profit level box for the trade entry
which is found under the T/P heading.
This will open a dialogue for the trade.
You then simply enter the level at which you want to set your take profit level in the
take profit box and press modify.
This will then update the take profit level for the trade entry in the order window, and
show a line on the chart to demonstrate visually where the take profit level is.
You can also add a take profit level when you initially open the trade.
When you open the new order dialogue box, you can simply enter the price for your take
profit level in the take profit box and this will be added as soon as you open the trade.
The last way to add a take profit level is to simply click on the line on the chart that
shows your entry and drag it to the level you want your take profit level to be.
It can be difficult to drop it exactly on the level you want but it allows you to set
a take profit level quickly.
The last way we can close a trade is by using what is known as a stop loss level.
This is simply a stop order that is used to close an existing position once it has reached
a predefined level for a loss.
For example, if I enter a buy position on the FTSE100 at 7000, I may feel that if the
price falls to 6975 that the trade will have failed.
So I can set a stop loss order at 6975 to close my position if the price falls to that
price.
The same can be done for a sell position.
If I enter a sell position at 7000 and decide that the trade will be incorrect if the price
reaches 7020, I can set a stop loss order to take me out of the market if the price
reaches 7020.
This order enables traders to quantify and manage their risk.
Stop loss orders and take profit orders can be used at the same time on any trade.
To use a stop loss order in MT4 we do exactly as we did before for the take profit level,
only this time we enter the price we want our stop loss level to be at in the stop loss
box.
Once entered simply press modify and the stop loss level will be updated for the trade entry
in the order window and the level will be added to the chart as with the take profit
level.
You can also set a stop loss level when initially opening a trade . As with the take profit
level, simply enter the price you want your stop loss level to be at in the stop loss
box in the new order window before you open the trade.
Once you execute the order, the stop loss will be instantly added.
Also as with the take profit level, you can set a stop loss level by clicking the line
that shows your entry on the chart and dragging it to where you want your stop loss level
to be.
As I said before it can be difficult to place it at a specific level using this method but
it allows you to very quickly set a stop loss for the position.
To finish, I just wanted to make you aware of how you can manage open positions using
these orders.
You can move the price at which at order is set at any time.
This is very useful when you want to reduce your risk on a trade as the price moves in
your favor.
For example, lets say we sold the FTSE100 at 7000 with a stop loss level at 7020.
The price then moves down to 6970, we then may choose move our stop loss level down to
7000 so that if the price comes back up to 7000, we are stopped out at break even.
So by managing the stop loss level as the price moved in our favor, we removed all the
risk on the trade.
To change an order level on MT4 you can either double click the order level you wish to change
in the order window as we did before and then amend the level in either the stop loss or
take profit boxes and press modify.
Or you can simply drag the corresponding line on the chart to the new level you want to
set the order to.
This will then automatically update the trade entry in the order window with the new level.
You can also set more than one particular order for each trade.
This enables you to scale out of a trade at different prices if so desired.
For example, if we entered a buy position on the FTSE100 at 7000 and had two profit
targets above, one at 7020 and one at 7035.
We could set a take profit level to close half of the position at the first profit target
and another take profit level to close the remaining half at the second profit target.
The ability to do this is sometimes not possible with certain platforms or brokers, but you
can work around this by entering two or more separate positions if scaling in or out is
something you wanted to do.
MT4 does let you scale out of positions if that is something you wanted to do.
To do this we need to create a new order to partially close a position at a specific level.
So lets open a sell order at the current market price with a position size of 1
Now if we wanted to set a take profit level to close half of the position at one price
and another take profit level to close the remaining half at another price, we have to
set to separate buy limit orders rather than entering a take profit level on the actual
trade.
If we did that, the whole trade would close at the level we set.
So to set the buy limits we do exactly as we did earlier and press the new order button
In the dialogue box that opens, we check the market is correct in the symbol drop down,
then we enter 0.5 in the volume box as we only want this order to close half of the
position.
We then change the type to a pending order Set the pending order type to buy limit and
enter the price we want to order at and press place
The order is then added to the order window and to our chart.
Then we simply do the whole process again but this time we set the second price that
we want to close the remaining half of the position out at.
And that's it.
We now have two orders that will each close half of our sell position if the price moves
down to these prices.
So that wraps up this video on entering, exiting and managing positions using different orders,
I hope you have found it useful.
If you enjoyed the video, please feel free to drop a like on it.
If you have any questions or want me to cover any other topics in future videos, please
let me know in the comments below.
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I will be continuing this trading basics series to provide new traders with all the knowledge
they need to get started.
Thank you very much for watching and I hope you all have a good trading week.