| All order types listed underneath are accepted by ACM and may be placed either online or by phone.
A market order is an order to buy or sell at the current market
price. Customers using ACM's online currency trading platform click on
the buy or sell button after having specified their deal size.
The execution of the order is instantaneous, this means that
the price seen at the exact time of the click will be given to
the customer. Placing a market order by phone is quite similar
but usually takes a few seconds more time.
The exact process
goes like this:
1. A customer specifies the currency pair and the deal size to
the dealer.
2. The dealer gives a two-way price (BID and ASK price).
3. The customer takes one of the two prices (he may ask for a re-quote).
4. The dealer confirms the trade. Under normal market conditions,
ACM dealers usually respond to market orders in about 5 to 10
seconds at most. Assuming the customer deals immediately on the
offered prices a phone deal can be made in 10 to 15 seconds on
average.
Whether you choose to deal with ACM or another firm, you should be aware
that it is a correct market practice for such institutions to quote two-way
prices to a customer who wishes to trade. A firm that does not do so is almost certainly taking advantage of their customers' ignorance as far
trading procedures are concerned.
Limit Orders
A limit order is an order placed to buy or sell at a certain
price. The order essentially contains two variables, price and
duration. The trader specifies the price at which he wishes to
buy/sell a certain currency pair and also specifies the duration
that the order should remain active.
GTC (Good till cancelled): A GTC order remains active in the
market until the trader decides to cancel it. The dealer will not cancel the order at any time therefore it is the customer's
responsibility to remember that he possesses the order.
GFD (Good for the day): A GFD order remains
active in the market until the end of the trading day. Since
foreign exchange is an
ongoing market the end of day must be a set hour.
For ACM the end of the trading day occurs at exactly 23:00 CET.
Stop orders
A stop order is also an order placed to buy or sell at a certain
price. The order contains the same two variables, price and duration.
The main difference between a limit order and a stop order is
that stop orders are usually used to limit loss potential on
a transaction whilst limit orders are used to enter the market,
add to a pre-existing position and profit taking. The same variations
are used to specify duration as in limit orders (GTC and GFD).
Let's take the following example:
Example: Trader x Buys EUR/USD 100'000 @ 0.9340, he's expecting
a 60 to 70 pip move in the market but he wants to protect himself
in case he has overestimated the potential strength of the Euro.
He knows that 0.9310 is a b support level so he places a
stop loss order to sell at that level. Trader x has limited his
risk on this particular trade to 30 pips or USD 300.
Another usage of a stop order is when a trader is expecting
a price breakout to occur and wishes to grasp the opportunity
to 'ride' the breakout. In this case a trade will place an order
to buy or sell 'on stop'. To illustrate the logic behind this
let's review the following scenario:
Example: Trader x sees EUR/USD breaking through the 0.9390 resistance
level. He believes that if this happens, the price of EUR/USD
could be headed to 0.9450 or over. At this point the market is
at 0.9350 so trader x places an order to initiate a buying position
of 500'000 at 0.9392 'on stop'.
OCO
An OCO (order cancels other) order is a mixture of 2 limit and/or
stop orders. 2 orders with price and duration variables are placed
above and below the current price. When one of the orders is
executed the other order is cancelled. To illustrate how an OCO
order works let's take the following example:
Example: The price of EUR/USD is 0.9340. Trader x wants
to either buy 500'000 at 0.9395 over the resistance level in
anticipation
of a breakout or initiate a selling position if the price falls
to 0.9300. The understanding is that if 0.9395 is reached, he
will buy 500'000 and the 0.9300 order will be automatically cancelled. |