The ChoosaBroker Trading Academy

14.1. How to Place Special Order with MT4

Traders have the option to place 4 different types of orders with the MT4 platform. Let us briefly discuss each of their characteristics.

MetaTrader 4 Market Execution Orders

A market execution order is an instruction to the intermediate brokerage firm to “BUY” or “SELL” an underlying asset at the current or ongoing price. Upon fulfilment of the order, a security is bought at the “ASK” price or sold at the “BID” quote. The primary advantage of using market orders is that a trader is assured of getting his or her trade filled. The one big downside of using market order is that it can result in significant slippage (getting filled at a less favourable price); especially in less liquid markets.

Setting MetaTrader 4 Limit Orders

There are four distinct categories of limit orders or pending orders available on the MT4 platform:

  • Buy Limit Order – It is an order to buy an asset at or below a pre-defined price. Buy Limit orders are typically initiated if a trader forecasts that the price of a security, having depreciated in value, is likely to increase in the immediate future.
  • Buy Stop Order – It is an order to purchase an underlying asset at a price above a stated quote. A Buy Stop order is executed when the future “ASK” rate equals the value specified. Such types of orders are mostly entered in anticipation that the price of an asset, having risen in value, will continue to appreciate.
  • Sell Limit Order – It is an order to sell an asset at or above a pre-defined price level. Orders of this nature are generally placed in expectation that the security’s price, having increased to a certain level, will decline in the immediate future.
  • Sell Stop Order – It is an order to sell a security at a price below a specified market quote. A Sell Stop order is executed when the future “BID” price is equal to the value defined in the order. Orders of this type are usually initiated if a trader expects the security’s price, having declined, to continue to lose value.

Setting MetaTrader 4 Stop Orders

This type of order is designed to limit a trader’s loss if the underlying asset’s price starts to move in an unprofitable direction. Stop Loss orders are always connected to either an open position or a pending order. Although most investors associate Stop Loss orders with long positions, it can also shield against short trades gone wrong.

SAMPLE ORDER SETUP

For example, if you own shares of XYZ, currently trading at $100, and want to hedge against any surprise decline, you could execute a Stop Loss order to sell the stock if it falls below $98. Contrarily, if you short XYZ at $100, expecting price to decline, you can limit your losses by placing a Stop Loss order to square-off above $102.

Setting MetaTrader 4 Take Profit Orders

It is a unique profit-booking mechanism inbuilt in MT4. A Take Profit order will get automatically executed when the security’s price reaches your defined profit target. Post execution of this order, the open long or short position gets closed. A Take Profit order is always connected to an existing position or a pending order. It is frequently used by Forex traders to specify the exact number of pips at which to profitably close out their current positions.

To add a stop loss or take profit level in an open position, click on the “Trade” tab in the “Terminal” section of MT4. In there will be listed all of your trades.

  • Right-click on the open trade and select “Modify or Delete Order.”
  • Fill in the desired “Stop Loss” and/or “Take Profit” levels.
  • Once done, click the “Modify” button. A dialogue box will pop-up to confirm that the trade modifications have been inserted.

Final Few Notes

Risk management is a critical but often overlooked pre-requisite to success in active trading. One of the keys to achieving long-term sustainability in financial markets is prudent risk management. Stop Loss and Take Profits orders are two integral tools to achieve just that. 

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