What is a limit order in foreign exchange trading?Foreign exchange trading involves two types of limit orders:

1. Limit order opening

The first method is to place a price limit order to obtain a better listing price. If the euro/dollar trades at 1.1294 and you believe it will fall to 1.1200 before rebounding, you can buy at a limit order of 1.1200.

If the euro/dollar trades at the 1.12939 level and you believe it will rebound to 1.1300 before selling, you will place a limit order to sell 1.1300. When using a price limit order, you will only make transactions at the price you specify or a better price.

2. Limit order closing position

You can also use limit orders to close transactions when it is advantageous for you to move a specified amount in the market. If you buy euros/dollars at 1.1300 and want to exit when your transaction shows a profit of 100 points, you can set your sell limit order to be 100 points higher than your entry point or at the 1.1400 level.

If you sell euros/dollars at 1.1300 and want to exit when your transaction shows a profit of 100 points, you can place the buy limit order below your entry point of 100 points or at the 1.1200 level.

If using a limit order, traders usually give a fixed instruction to forex brokers to execute their orders at a specified price. Assuming you want to buy EUR/USD at 1.1730 and the market price is 1.1740, use a limit order and specify that you want to add it to 1.1730. Of course, unless the price drops below 1.1730, the price limit order will not be executed immediately. Limit orders help traders execute trades at the price they want, rather than opening positions at the current market price.

Similarly, if you want to short EUR/USD at a specified price, you can use a sell limit order. As long as the market price reaches the level you specified, the order will be executed at the specified price. But if the market price does not reach the level specified in the price limit order, the order will not be executed. In other words, traders should try to open their positions at a reasonable price, so that the effectiveness of limit orders becomes apparent.