Being in control of the market is one way you can become a profitable trader. But it is easier said than done. To be able to control the market, you must learn to use several tools provided by Forex broker in Italy and be in your best attitude. A limit order is a tool that traders use to gain more control over the changes in the market. As you already know, the market prices in MetaTrader 5 (MT5) change from time to time. Although this can be considered as an advantage, it will take a toll on you if you are not properly equipped.
First of all, you must understand what is the limit order, why you should use it, when is the most appropriate time to place it, and the factors that could impact its execution.
Limit Order
This order either buys an asset given its maximum price or sells the stocks at a minimum price available. If you set a buy limit order, you are actually putting a price ceiling. This is the highest possible price that you are willing to pay for the share that you want to acquire. Setting a sell limit order, you are putting a price floor or the lowest possible amount that you are willing to get for the share that you want to sell. This only means that any order gets filled and executed at the designated price that is assigned. You are also permitting that orders are only filled upon reaching a particular condition. With the use of limit orders, you get to take full control of the execution. The only thing that you should be wary about is that your orders might not get executed right away if it doesn’t meet the conditions.
When should you use limit orders?
Limit orders can be used during after-hours, standard, and pre-market trading sessions. This is different from market orders that get executed in a standard market session. For after-hours and pre-market orders, they are valid for execution throughout the entire trading session. It will expire by the end of each session in case they were not canceled and filled. But for limit orders on a standard trading session, they are allowing traders to pick the duration.
Advantages of Limit Orders
Why should you use limit orders? Here are some things that you need to know.
It offers price ceilings and price floors – it is such a great advantage to have a price ceiling set on each of your trades. As for the price floor, it works great, especially on volatile markets.
It offers pre-market and after-hours sessions – as mentioned above, limit orders don’t allow your orders to be executed during pre-market and after-hours sessions. However, the market allows extended-hours trading sessions for traders.
A limit order is part of the risk management plan that you must have when opening a position in the market. Trading will always be risky even in MetaTrader 5 (MT5). Losses will come and you cannot eliminate them. But through the help of good risk management and a reputable Forex broker in Italy, you can mitigate the risks and become a master trader.