A pending order is a trading instruction to your broker or dealer to open a buy or sell position in a financial instrument when the price reaches a specific level you set in advance, with a defined volume and specified stop loss and take profit levels.
Pending orders give you an element of precision, letting you define the terms of your order in advance rather than reacting in the moment. Unlike market orders that execute immediately at the best available price, pending orders wait until your chosen price level is reached.
Four Main Types of Pending Orders
There are four primary pending order types used in forex trading:
- Buy Limit – An instruction to buy when the Ask price falls to a level below the current market price. This order type is useful when you expect the price to pull back before rising.
- Buy Stop – An instruction to buy when the price rises above the current market level. Traders use this to enter long positions once the price breaks above a resistance level.
- Sell Limit – An instruction to sell when the Bid price reaches a level below the current market price. This allows you to exit or short-sell at a predetermined higher price.
- Sell Stop – An instruction to sell when the price falls below your specified level. This order type is commonly used to protect against losses or enter short positions after a breakdown.
How to Trade with Pending Orders on Forex
Using pending orders in forex trading eliminates the need to monitor your screen constantly, reducing the risk of missing favorable entry points. This approach allows you to create a clear trading plan and reduces emotional decision-making during volatile market conditions.
Pending orders are stored on your broker’s server, so you don’t need to keep your trading terminal open. This makes them ideal for traders who cannot watch the markets in real time or who prefer to plan their trades in advance. Many forex strategies and trading tactics rely on pending orders as a core component of their execution method.
FAQ
What is the difference between a pending order and a market order?
A market order executes immediately at the best available price, while a pending order waits until the price reaches a level you specify in advance. Market orders are useful for urgent trades, while pending orders provide precision and allow you to plan entries ahead of time.
Do I need to keep my trading terminal open for pending orders to work?
No. Pending orders are stored on your broker’s server, so your terminal can remain closed. The broker will automatically execute your order when the specified price level is reached.
When should I use Buy Limit versus Buy Stop?
Use Buy Limit when you expect the price to pull back to a lower level before rising—you set the order below the current price. Use Buy Stop when you expect the price to break above a resistance level—you set the order above the current price.
