Buy and Sell Orders
In forex trading, a buy or sell order is used to enter a trade. A buy order is used when you believe the price of a currency pair will increase, and a sell order is used when you believe the price will decrease. For example, if you believe the EUR/USD currency pair will increase in value, you would place a buy order for that pair.
Take Profit
A take profit order is used to automatically close a trade when the price reaches a specific level, in order to lock in profits. For example, if you buy the EUR/USD pair at 1.2000 and set a take profit at 1.2050, the trade will automatically close when the price reaches 1.2050, locking in a profit of 50 pips.
Stop Loss
A stop loss order is used to automatically close a trade when the price reaches a specific level, in order to limit potential losses. For example, if you buy the EUR/USD pair at 1.2000 and set a stop loss at 1.1950, the trade will automatically close if the price reaches 1.1950, limiting your potential loss to 50 pips.
Example
Let's say you believe the USD/JPY currency pair will decrease in value, and you decide to enter a sell position at the current market price of 110.00. You set a take profit order at 109.50 to lock in your potential profit and a stop loss order at 110.50 to limit your potential loss. If the price of USD/JPY decreases as you expected and reaches 109.50, your take profit order will be triggered, and the trade will automatically close, locking in a profit of 50 pips. If the price goes up instead and reaches 110.50, your stop loss order will be triggered, and the trade will automatically close, limiting your potential loss to 50 pips.
