The Best Way to Use Pending Orders
The pending order strategy has gained popularity among futures market traders. This situation is due to the high efficiency of the working tactic, which allows it to reduce the psychological stress of market participants and to open profitable positions in conditions of sharp price changes. With the help of this strategy, the probability level of a forex trade can be increased several times.
A pending order is an order that will be executed when the price touches a predetermined point, or an order to open a position at a certain price level. When a trader uses a pending buy stop order that sets an open target at the current price, it means that the trader assumes that the price will rise rapidly from the current price, the principle is similar to the goal of the breakout strategy, which only executes a buy signal after the price has managed to break a key resistance level.
That is why, the target level in the buy stop is usually adjusted to the resistance that has the potential to be broken by a price increase. As for sell stops, the target entry position is generally adjusted to the support level, which if broken can confirm further price declines.
On the other hand, using a buy limit means that the trader expects the price to reverse higher after touching a level lower than the current price. Such a reversal expectation is clearly in line with the reversal strategy. The price target in a pending buy limit order can be filled with key support that traders think can hold the price down. The opposite applies to sell limits, because traders can set open trade targets according to resistance which can limit bullish price movements.
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