Sell Limit Order in Forex: Understand How it Works

The forex market is an international market where financial instruments get traded globally. Risks in trading on the forex market can be minimized using forex orders. There are different types of forex orders placed on trades. An example is the sell limit order.

The sell limit is an order placed by investors or forex traders above the current market price. It can only get placed when the price of an asset gets to the current market price. 

Forex traders who set the sell limit order predict a fall in the price of an asset. That is after there had been a rise in the price value of the asset.

Orders in Forex

Orders can get considered vital tools for forex traders. They get used during trades in the forex market—especially when using a trading strategy.

Orders can also get used to open or close positions in trades. This means that they can be used to start or exit a trade. They help maximize and protect profits. They also help cut market risks.

Traders should have good knowledge of the different order types as this will help them choose the best order that meets their trade needs. Orders also help traders achieve their trading goals.

There are different types of orders in the forex market. Some of them are the market order, the buy limit order, the sell stop order, and the sell limit orders.

When the order gets received, the market order executes a trade at the best available price. The buy limit order gets placed at a fixed limit price or lower. The order gets executed when the current price gets to the fixed price or lower.

The sell stop order triggers a market order when the market price reaches the predetermined price. The sell limit order gets placed to sell at a fixed price. The order gets executed when the current market price is fixed or higher.

What is a Sell Limit in Forex Trading?

A sell limit is an order that an investor or forex trader places above the current market price.

This order gets executed when the price of the desired asset is at the market price. It can also get placed if the selected asset’s price is higher than the current market price.

This order is an instruction to sell a financial instrument at the market price or higher. Once the price value gets to your selected market price or higher, this gets done. It is essential to bear in mind that the price will be higher than the present market price.

This order gets placed based on the prediction of an investor. That is if an asset’s price value will rise or fall. The investor makes use of signals to make these predictions. The signals get interpreted and used for predicting the rise or fall of assets.

The sell limit order is one of the risk management tools in the forex market. It gives a trader a level of control over his trade which helps the trader cut losses and avoid certain risks.

An excellent example of how the sell limit order works can get seen below:

A trader places a sell limit order of 120 shares for an asset at $37.20. This will not get executed at anything less than the stated price. The order placed will only sell 120 shares of asset XYZ at a $37.20 or higher sell limit.

The asset will not sell for less than $37.20 per share. It can also sell if the stock rises above $37.20. That is, the price of the asset will get to $37.20 or higher before the sell limit order gets executed. The Investorinvestor will benefit by getting more than the price limit for the stated shares. If the asset price falls below the market price, this order will not get executed.

In a case where the price of a particular stock goes up, the currency at the base or the base currency attains more value. The expectation of a forex trader or Investorinvestor is that the prices will come down.

Traders place pending orders on their assets. The order gets executed when the price of the instruments reaches the market price. A forex trader will open a sell limit if he believes that the value of an asset will go down. That is after it had risen.

It takes a level of experience to understand and know where and when to set a sell limit. Thus a good knowledge of the forex market gets needed before placing a sell limit order. When it is set too low, it will not get executed. This is not good for business and the Investorinvestor.

A forex trader is hopeful that the price of an asset will fall before he places a sell limit order. This gets done after forex signals get studied and interpreted.

What is a Set Limit?

A sell limit is a predefined price set by a forex trader when they intend to sell an asset in the future.

A sell limit gets used to sell an existing asset or holding. This gets done when the set limit price exceeds the market price.

This order is set at a limit price the trader wishes to sell. The trade is executed when the asset’s market price is fixed. It also gets executed when the market price gets higher than the set price.

The limit price represents the highest price a trader is willing to invest in selling an asset. The trade will only get filled if the asset price gets to this set price or higher. The sell limit order places a sell trade.

The forex trader will wait for the price to get to that set point before getting his sell execution in the market.

The execution of the sell limit order is not assured. Traders get required to set a time frame for the trade to be active. The time frame can be either a “day trade” or “good till canceled.”

The “day trade” cancels the trade if it does not get initiated until the next market period. The “good till canceled” trade gets left for a long time. It can only get canceled by the trader or the brokerage platform.

The brokerage platform can only close this trade after its fixed expiry period. Some brokerage platforms set their trade expiry period at one month.

The sell limit also improves a trader’s trading psychology. Setting a sell limit involves being patient and studying the market more. This means that the current market price of an asset has to get to a trader’s desired sell limit.

When this happens, the trader gets a better risk to reward ratio. It also prevents a trader from chasing the market. It makes the trader more patient and minimizes loss.

Traders are also advised to set a stop loss and take profit orders on every trade. These orders close a trade when it gets to a certain limit. This helps cut losses in a trade.

Traders get advised to have a basic understanding of the forex market. This will help them understand the risks involved in a trade. It will also give a trader control over the capital he invests. He chooses a particular amount he wishes to invest in a trade.

What is the Difference Between Sell Stop and Sell Limit in Forex?

The sell stop is very different from the sell limit order. The sell stop has a fixed stop price. When the price of the asset gets to this stop price, a market order gets initiated.

A trader sets a fixed stop price for an asset to sell at in the sell stop. This order gets executed only if the market moves in favor of the stop price. There may be slippage in the sell stop, which may occur due to marginal discrepancy. The marginal difference exists between the market price and the stop price.

The sell stop order for a sell trade gets initiated if the stop price is lower than the market price. The sell stop order for a buy trade gets initiated if the stop price is higher than the market price.

The sell limit order gets initiated when the set price of an asset reaches the market price or higher. A trader who chooses the sell limit order must select a particular limit price. That is the price that the trader is willing to sell at.

Although there is no assurance that the trade will get executed when it gets to this set price, traders get required to set a time frame they are willing to leave the trade open for. This gets done because the trade is not guaranteed to get executed.

What is a Sell Limit and Sell Stop Entry Order?

The sell limit order is an order to sell an asset. This order is initiated when the set limit price reaches the current market price. It also gets initiated when the set limit price is above the current market price.

The sell limit order makes trading easier. It offers a trader an opportunity to sell short at his desired price. That is, at the current market price or higher.

The sell stops entry order or the sell stop order gets placed below the current market price. The order gets executed when the trade gets to that fixed stop price. The sell stop makes forex trading simpler.

A trader uses a breakdown strategy when setting the sell stop entry order. That is, he is expecting the price value of an asset to fall. He expects it to fall below the support level. The stop sells entry order makes sure a trader never misses a trade. It also ensures the trader does not chase the price when it overstretches.

How Do I Use Forex Selling Limits?

The forex selling limits can get placed through different forex platforms: these platforms offer access to the forex market. The selling limits can get set on open trades in the forex market.

The selling limit gets placed above the current market price. It only gets triggered when the set limit price gets to the current market price or higher. The buy limit is the exact opposite of the sell limit.

Let’s use an example to explain how the selling limit works in forex.

A trader wants to place a sell trade on EUR/USD at 1.2200. He places his sell limit at 1.2200. The current market price is 1.1230. This trade will only get executed when the market price of EUR/USD reaches 1.2200 or higher.

When a forex trader uses a sell limit order, he makes the trade easier. Some of the benefits of using the selling limits are:

  • An Investor is able to go short and sell right.
  • There is a guarantee that the price will go high, and the trade will get initiated.
  • If the market gap is higher than the sell limit order, the trader will sell short at a high price.
  • When you let the price come to the level you want, the trader will make a profit.
  • When the market price reaches the fixed limit, the trader achieves a better risk to reward.
  • The selling limit is a better way to ride the market trends.
  • The selling limit helps a trader to recognize a downtrend.
  • The selling limit increases trade resistance.

Platforms you can use for this type of trade include:

Roboforex

This is a brokerage company that was been found in the year 2009. It offers financial market services in 169 countries. Over  3.5 million traders/users are clients of Roboforex. RoboForex is the forerunner in developing software in the Forex industry.

RoboForex is also recognized as a trusted partner. They are the most prestigious financial market experts. The company has many prestigious awards. RoboForex has a Europe license number which is 19/13 Robomarkets Ltd. This group of companies also has an international license. This will help to offer services from FSC Belize.

Pros of RoboForex

  • Their deposit is minimal, and they have available favorable trading conditions.
  • RoboForex has a unique investment program known as CopyFx
  • They have the highest payments for affiliates: from $5 per lot.
  • They offer instant funds withdrawal option to traders and investors

Cons of RoboForex

  • There must be the smallest deposit – $10
  • It has a small number of pairs of currency – 36, is been used for accounts: The Pro, P is been used for  Pro, Pro-Cent, ECN, Prime
  • When trading is being done on the R trader platform, there is a lack or absence of cryptocurrency tools

Capital.com

Capital.com is a well-known CFD broker. The brokerage firm started out in 2016 and has some offices located in Seychelles, Cyprus, United Kingdom, Australia, and Gibraltar. Capital.com is also authorized and regulated by the Financial Services Authority of Seychelles, Cyprus Securities and Exchange Commission, the Financial Conduct Authority (FCA), and the Australian Securities and Investments Commission (ASIC).

Pros and Cons of Capital.com

Capital.com offers much lower forex and CFD fees. They provide stock traders with real stock trades with zero commission fees. This is for customers under FCA and CySEC, basically the United Kingdom and European clients. The opening process for an account is easy. They also have an experienced customer service team that uses live chat and email support to attend to clients while providing quick responses and helpful answers. 

One downside of choosing Capital.com is that the fees for stock index CFD are high. There also have a limited range of products for those who trade CFDs. The products available include crypto, index, and equity. However, crypto is not accessible to clients in the UK. Stocks that are real are not readily available to clients in Australia. There is no provision for base currencies in the minor accounts.

That said, here are some other advantages of Capital.com.

  • The fees paid for forex CFDs are quite low 
  • High index CFD fee for stock. 
  • Capital.com has a great account open experience.
  • They provide excellent chat support and email.

Vantage Market

Vantage was being found in 2009 as MTX Global. It was been called Vantage FX. This vantage is a respectable member of Vantage Global Prime Pty Ltd. This brand has a Financial Services License for Australia. It also has the investment commission and Australian securities.

The group also has a body that regulates the U.K., the Financial Conduct Authority. Vantage has an entity that holds regulatory status. They are the Cayman Islands Monetary Authority. They are in Vanuatu, where the Financial Services Commission is situated.

Vantage Market can be referred to as an average-risk brokerage firm, with a score of 83 out of 99. They round out its Meta Trader platform with support from socio platforms for trading.  This Vantage trails the vantage rounds out its MetaTrader platforms. 

This content is also powered by trading central and a proprietary mobile app. Vantage remains an industry leader in key areas such as research and education

Pros of Vantage

The brand maintains a status regulatory in two tier-1 jurisdictions. The other tier-3 jurisdiction. This makes it a safe broker for trading CFDs and forex.

This holds indemnity insurance for extra protection more than any regulatory coverage.

Vantage has done a great job of fully including the view of the trading platform into a MetaTrader suite.

Vantage provides Smart Trader and add-ons for MetaTrader. It also offers many social copy-trading platforms. It is key to note that they are not in Australia.

Vantage is being ranked among the best copy trading broker for 2022. It is also ranked the best MetaTrader broker.

Cons of Vantage

When trading with Vantage market as your broker, it is important to note that the Pro ECN account will need the smallest deposit of $20,000. There is access to Pro trader tool. This is charged by central trading. It needs a $1,000 deposit.

The spread on an account is been standardized. Standard accounts do not impress. A standard does not go unless you deposit a small amount. This amount is $10,000 and it will become available for active trader rebates.

Conclusion

A limit order is placed when a trader is about to enter a new position or leave his current position. The sell limit order sells an asset at a fixed or higher price. That is when the current market price gets to the set limit price or higher.

The sell limit order gets used more when a trader wants to fade a breakout. A trader fades a breakout if not expecting the market price to break a support level.

That is when he expects the price of the currency to fall after it reaches the support level. Some features of the sell limit order are the selling stop, stop loss and take profit. These features should be in use more when setting the sell limit order. 

Traders must set two-time durations for each trade placed in the market—the end of the day order and the good till canceled order. The end of the day order closes a trading order on an active trading day. That is, whether the trade gets initiated or not.

The “good till canceled” trading order is indefinite. It can only get canceled by the trader. It can also get canceled by the brokerage platform if it gets to its set end date. Most brokerage platforms set their trade expiry period at one month.

Frequently asked questions

What is a Limit order book?

A limit order book is a term that is associated with forex. It is a trading tool used by most exchanges around the world. It can also register all the orders that are placed by sellers and buyers, covering security. 

A limit order book will include the parties that are interested in selling and buying, the number of shares and the certain price. The limit order book is always kept up to date in real-time over the course of a day. The course of the trading day.

en_USEnglish