There are two kinds of conditional order you can place with foreign exchange trades : the stop loss ( sometimes written stop / loss ) and the limit order.
The stop loss is a well known order that controls the chance involved in a trade. With a stop loss, you are saying to the broker, “If the price goes this far against me, I desire out. The stop loss will kick in and protect the majority of your funds.
A limit order has similarities but is applicable to the opposite situation, the situation where you have a winning trade. With a limit order, you are saying to the broker, “If the price reaches this level, that’s's enough, I’ll close there and take it. ” The limit order will be caused if your pre arranged price is reached and the trade will be closed at that cost. It appears counter intuitive. If you don’t place a limit order, when will you close the trade? How will you know when it has gone as far as it is going? If you wait too long, a unexpected reversal could see all your profits wiped out. So unless you’ve a system that is set up with very definite criteria to tell you when to close a trade, you will probably be better off if you use limit orders.
