Market Orders
A market order enters or exits a position immediately at the best available price.2 It is the most frequently used order type with FXCM.
Slippage Characteristics:
Market orders can receive positive slippage and negative slippage. A 'market range' market order provides price certainty but it does not provide execution certainty. A 'at market' market order provides execution certainty but it does not provide price certainty.
At Market and Market Range:
FXCM market orders include two order types: 'at market' and 'market range'.
Selecting 'at market' instructs the order to fill at the market price. This could be the price requested, a better price, or a
worse price depending on market conditions. The executed price is determined primarily by price volatility at the time the order executes.
Selecting 'market range' instructs the order to execute immediately only if the best available price is within a defined range of prices. If the only available price is outside of the defined range, the order will not execute. This order type guarantees price certainty but it does not guarantee execution certainty.
The Takeaway
Market Orders are beneficial when you want to enter or exit the market now. The 'At Market' order type guarantees execution certainty but not price certainty. The 'Market Range' order type guarantees price certainty but not execution certainty.
Entry Orders
An entry order will only trigger for execution if the market price reaches the entry order price.
Slippage Characteristics:
There are two types of entry orders: stop entry orders and limit entry orders. A stop entry order can receive both positive and negative slippage. A limit entry order is designed to only receive positive slippage.
Stop Entry vs. Limit Entry:
An entry order is considered a 'stop' entry order when the entry order price is a less favorable price than the current market price (i.e. a higher price when you are buying and a lower price when you are selling). This order type can be filled at the requested price, a better price, or a worse price depending on market conditions. Using this order type, especially around news events or other volatile market conditions, can subject you to negative slippage.
An entry order is considered a 'limit' entry order when the order price is a more favorable price than the current market price (i.e. a lower price if you are buying and a higher price if you are selling). This order type is designed to only fill at the requested price or better. Thus, traders gain price certainty but they do not have execution certainty when using this order type. Using a limit entry order to open trades, especially around news events or other volatile market conditions, may be a better option than using a stop entry order because negative slippage can be avoided.
The Takeaway
Entry orders are beneficial when you want to enter or exit the market at a future price. When trading around volatile market conditions a limit entry order can be used to open trades instead of a stop entry order if you want to potentially avoid negative slippage. Please note: limit entry orders do not provide execution certainty.
Stop and Limit Orders
A stop order is designed to execute at the market price. This could be the price requested, a better price, or a worse price depending on market conditions. It was designed this way because a stop order is most frequently used to exit a trade from a losing position. A stop order provides execution certainty but it does not provide price certainty, so negative slippage is possible.
A limit order is designed to execute at a specified price or better. For many traders, the limit order price is set at their profit target. Limit orders provide price certainty but they do not provide execution certainty because they are designed to only fill at the limit price or better.
Slippage Characteristics:
A stop order can receive both positive and negative slippage. A limit order is designed to receive positive slippage but not negative slippage.
The Takeaway
Stop and limit orders are beneficial when you want to exit the market at a future price. When trading around volatile market conditions a limit order can be used to close trades to provide price certainty.