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Discover the Various Types of Forex Transactions

Everyone knows that you can switch one currency to another for a given exchange rate, but few people realize that there are more complicated types of transactions on the forex market than just a simple swap.

Learning about the various options when it comes to forex transactions could be a huge advantage, as it will allow you to access a whole wealth of options that could make a big difference in helping you to make a profit, or avoid a loss.

Among the types of forex transactions that you should be aware of are:

1. Market Orders

Essentially, these transactions are the types of orders that you’re probably most familiar with. All that they involve is the transfer of one currency to another, using whatever the exchange rate at the time may be.

But you should be aware that no order is instantaneous. Between the time that you see an exchange rate, place a market order, and have it go through, there will undoubtedly be a gap of at least a few seconds.

During that time the market can fluctuate, and the exchange rate of your transaction will end up being the exchange rate at the time that the order goes through.

2. Limit Orders

On the whole, limit orders aren’t too hard to grasp. All that they entail is the purchase of currencies below market price or the sale of currencies above market price. So if you have a limit order to buy US$ when the exchange rate to Euros is 1.4, the minute it hits that exchange rate, you will buy that currency.

Because these orders are pre-placed, there is no risk of losing valuable seconds between the time that you see an exchange rate and the time that you place an order. Therefore, many advanced traders make good use of such orders.

3. Stop Orders

Similar to limit orders, but in reverse, stop orders are pretty much just orders to buy above the market rate, or sell below the market rate. Basically they are used to limit the losses that could be incurred by a big fluctuation that you didn’t expect.

So let’s just say you had bought US$ when its exchange rate with Euros was 1.4, and you had expected that rate to rise (so that you would profit). If instead of rising that rate fell, if you had a stop order to sell at 1.35, you could avoid making a big loss.

Savvy marketers use all of these three types of orders to control their forex investments. Naturally, the intricacies of these orders, especially the latter two, can take time to master, and so you should tread carefully when you first start off until you manage to come to grips with both.

Once you do though, you’ll find that you can make way more profits, and way less losses, than ever before!

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