FOREX ORDERS

Market Orders.  When the forex trader clicks on a price, he or she creates an initial order to open a foreign currency position at the current market price.  Before the initial order is submitted to the automated electronic dealing system, the forex trader must confirm the order in an order confirmation window.  The price sent to the automated dealer will be the price that was in the confirmation window at the moment the trader confirmed his or her order.  The automated dealer receives the initial order and automatically executes it if the available price is at the requested price.  The opened foreign currency position then appears on the client’s forex trading platform.  *Please note: depending on the FCM, traders may be subject to automatic fills for market orders regardless of the price clicked.  Please check with your CFOS/FX broker regarding the fill policies of your respective FCM.

Stop and Limit Orders.  A definition of stop and limit orders may be found in the types of orders section of this website.  Stop and limit orders are triggered when market price touches the price specified in the order.  When this happens, the forex trading platform automatically sends an initial order to the automated dealing system requesting that the order be filled at the specified price.  Orders may be re-quoted if the market price has moved away from the specified price (please note that due to possible price gaps over the weekend, slippage on Stop and Limit orders is possible when the foreign exchange market opens at 5pm EST on Sunday).  Foreign currency FCMs do their best to provide execution at the trader's specified price, however, during extremely fast markets, this sometimes is not possible.  *Please note: depending on the FCM, traders may be subject to automatic fills for market orders regardless of the price clicked.  Please check with your CFOS/FX broker regarding the fill policies of your respective FCM.

The minimum range between a new stop or limit order and the market price is a function of current market volatility.  It is obvious that during, or immediately preceding, significant economic announcements market volatility is greatly increased.  As a consequence, most foreign exchange FCMs have two options: (1) widening the spread on foreign currency pairs, or (2) increasing the entry, stop and limit re-quote ranges in order to reflect the degree of current market volatility.  Therefore, during extremely fast market moves you may notice that you are unable to place or move any stop or limit order to within 3 pips of the current market price - you may have to place your order further away due to market volatility. 

*Regarding re-quotes: If the price clicked by the forex trader has changed (for example, market orders placed in a fast market such as the weekly U.S. employment figures release time), the automated dealer will instantly generate and send to the client a re-quote at the most current market price.  Clients can either accept or reject the re-quote within a specified short amount of time.  Market orders will never be executed at a price other than the price the forex trader clicked on without the trader’s approval of a re-quote, unless the client is utilizing the "range" function.  The range function allows traders to automatically approve re-quotes within a certain range.  For example, if the range function is set to 5 and a trader places a market order during an extremely fast market, then the market order will automatically be processed if the most current price is within 5 pips of the requested price.  This would allow the trader to automatically and instantly execute the order without having to deal with a re-quote.  *Please note: depending on the FCM, traders may be subject to automatic fills for market orders regardless of the price clicked.  Please check with your CFOS/FX broker regarding the fill policies of your respective FCM.

The reason for re-quotes is that many forex FCMs offset client orders with counterparty banks and other liquidity providers that supply forex price feeds.  During fast market conditions, it can be extremely difficult to get set prices from these counterparty banks.  It is important for the client to understand how and why order entry may change somewhat during times of peak volatility because it can affect your bottom line.

*Disclaimer: Foreign exchange trading, foreign exchange investments and commodity futures trading and investments are not suitable for everyone.  Forex trading and commodity futures trading carry a high level of risk and the possibility exists that you could sustain a loss of all or more of your currency trading or commodity futures trading investment.  Before you decide to trade foreign currency options, trade foreign currency spot markets or trade commodity futures you should be aware of all risks associated with currency trading and futures trading.  If you would like more information about the risks of forex trading, commodity futures trading and of online forex trading and online futures trading, please contact a CFOS/FX futures and forex broker to discuss online foreign currency trading risks and/or commodity futures trading risks in detail.