How To Place Pending Orders

How To Place Pending Orders

All trading platforms offer the possibility to either trade at market or via pending orders.

To trade at market simply means that once the trade is executed, everything transpires immediately at the current market price. When trading with pending orders, a trader requires the market to move to the entry price first before a trade can take place. Importantly, should the price not reach this pre-defined level, the order is not fulfilled.

As a trader must have a plan prepared, trading with pending orders can be advantageous. Crucially, the risk of random entries and exits is eliminated, which means that an investor is dissuaded from overtrading.

Types of Pending Orders

To simplify, there are two categories of pending orders: Pending Sell Orders and Pending Buy Orders. Each category is then divided into two further sub-categories:

  • Buy Order Options – Should a trader want to buy from a higher level than the current market, they can do so by placing a Pending Buy Stop Order. On the other hand, should a trader wish to buy from a lower level, they may do so by placing a Pending Buy Limit Order.
  • Sell Order Options – A Pending Sell Stop Order may be placed when a trader wants to sell from levels that are lower than the current market prices. Similarly, a Pending Sell Limit Order can be used should the sale be intended to start from levels that are higher.

It is said that buying from higher levels is the equivalent to with buying strength – as taking the top tends to come with greater volume and demonstrates a solid interest in the long side. Meanwhile, selling from lower levels may equate with selling weakness, as bears frequently dominate the market.

How To Trade With Pending Orders

Trading with pending orders, as with anything, first requires a trader to chart the market looking for a break. Direction may be taken through application of select technical tools trading theories/strategies that are based on patterns. The popular Elliott Waves Theory, partnered with Gartley patterns can offer excellent possibilities when considering how to place pending orders. Both are heavily dependent on Fibonacci retracements/expansions and therefore specific levels are associated with a price moving in a certain direction.

On the other hand, if trading is directed based on such indicators (such as the crosses that moving averages make) or oscillators (that reach underbought and overbought territory), it may be difficult to apply these as a tool for pending orders, as both plot values only after the candle is closed. For example, the market may move ahead to a level of interest for a trade to be taken whilst the candle is open, however an indicator would not confirm this move until after it has closed and the opportunity might have passed.

Nevertheless, so long as one is aware of the pitfalls of their strategies and tools, the use of pending orders can give a trader the competitive advantage ahead of the market, increasing your chances for success significantly.