Podcast:
In this video:
00:24 Using limit orders when trading Forex
04:15 Held a 2 ½ hour live trading room webinar with a number of good trades
05:12 E-Book has been published on Amazon
In this video I want to talk about limit orders and I want to tell you why I like trading using limit orders. Let me share more details with you right now.
Why I Trade Forex Using Limit Orders
Hi traders, it’s Andrew Mitchem here the Forex Trading Coach and today is Friday the 16th of May and I want to talk about limit orders in this webinar and podcast. You see, I use limit orders on all time frames from monthly charts, weekly charts, daily charts and four hourly charts, and I love using them. It’s probably something that a lot of people don’t use. You see, most people tend to trade at the market because they feel they have to watch the charts all day long and it’s not really the case. You see, when you have a strategy that you know and you can see and you trust you see the trades developed and you only trade on the close of a chart or a candle then it makes really easy to use limit orders. So I have a pre-defined order in place on my platform to buy below the current price or to sell above the current price depending on which way the trade is moving.
So let’s say the price is moving up we get a pull pack and then I see a bar to go long again. Rather than entering at the market I place a limit order a buy limit to buy below the current price, so it’s doing a lot of things. First of all it means I should don’t need to be there at the market if the price retraces back to the level I’m looking at the trade to fill at. I don’t need to be there I can just place my limit order in my position size, my stop loss, my profit target, expiry date all in place and just walk away.
So let’s say the trade retraces and it gets filled. What that’s doing is it’s getting me into the market in the direction that I’m looking for the trade to move, but at a far better price than if I entered at the beginning of the new candle, especially when you’re talking four hour charts and above. So I’m getting in at better price. What that also does is it dramatically increases the return on that trade in terms of the reward to risk ratio of that trade. It means that let’s say on a four hour charts I might be getting a 2 or 2 ½ to 1 reward to risk out of the trade rather than maybe a 1 to 1 ½, if I enter at the market because if I still have my same stop loss and instead of getting in here at the market, I’m getting in down here while my stop loss still down here so I’ve only got this amount of stop loss rather than the full amount if I enter at the market, so what that means is the return from that trade is dramatically increased by filling at a better price. It also takes the emotion out of trading. You know I’m not sat there on the mouse going on should I or shouldn’t I, maybe, don’t know, what do I do or go for it. I don’t do that. You see, I put the limit order in and I walk away.
I also have my order set automatically by the platform to expire after one bar. So if I’m trading on the four hourly charts and the trade does not fill or does not retrace back to my buy limit order it just takes off in the ideal direction and doesn’t get me in the trade. Of course I missed out in the trade but I have the software set up automatically to delete the trade as a pending order after one bar. So if I’m trading in a weekly chart after just under a week so I have my set up that four days but pretty much the week it expires if the trade does not get filled; on the daily chart if the trade does not get filled within one day so within 24 hours it automatically gets deleted. So it’s just a really great way of trading especially on the high time frame charts.
