Working Orders | All You Need To Know

Working orders are trading orders that don't get filled immediately at the current market price. Instead, they wait on the order book until a specific price or time condition is met. These orders let you trade at your chosen price points or automatically close trades when you reach a profit or loss target.

Definition of working orders

Working orders, also known as pending orders, include stop and limit orders. They offer flexibility by allowing you to create more advanced trading strategies by combining them with other order types. You can set different expiry dates for working orders, such as same-day or "good 'til canceled," meaning they stay open until you cancel them or the condition is met. We have prepared this guide for you featuring the benefits of these orders, the different types, and how to use them.

Types of working orders

There are several types of working orders that traders can use to enhance their trading efficiency and profitability. Below, several of the more common working orders are described.

A limit order (reversal) is an order to deal at a certain price "better" than the market, i.e. to buy at a price below the market (BuyLimit) and to sell above the current price (SellLimit). These orders are executed only if the market performs a correction of the current trend and turns in the original direction.Limit orders can help traders enter or exit a trade at their preferred price level, but they may not be filled if the market does not reach the limit price.

Limit order (buy/sell)

A stop-limit order is an order to buy or sell an asset when it reaches a specified price, known as the stop-limit price. Stop orders can help traders protect their positions from adverse price movements or enter a trade in the direction of a breakout.

Stop-limit Orders

A one-cancels-the-other (OCO) is a pair of working orders that are linked together such that if one order is executed, the other order is automatically canceled. OCO orders can help traders to capture profits or limit losses in volatile markets without having to monitor both orders separately.

OCO (One-Cancels-the-Other) Order

A take profit (TP) is an order to close an existing position at a specified profit level. TP orders can help traders to lock in their profits when the market reaches their target level without having to manually close their positions.

Take-Profit Order

A stop loss (SL) is an order to close an existing position at a specified loss level. SL orders can help traders limit their losses when the market moves against them without having to manually close their positions.

When you select a broker for trading orders, it's important to consider those that offer robust platforms, reliable execution, and a range of order types.

Stop Loss Order

Benefits of using working orders

Listed below are some of the benefits of using working orders:

1. Improved Efficiency
   Working orders allow traders to set specific conditions for trades, which means they can automate parts of their trading process and reduce the time spent monitoring the market.

2. Better Risk Management
   By setting predetermined entry and exit points, traders can manage their risk more effectively. This helps limit losses and secure profits at desired levels.

3. Price Control
   Working orders let traders specify the exact price at which they want to buy or sell, helping them achieve better prices compared to market orders that execute at the current market price.

4. Reduced Emotional Trading
   Automated execution of trades based on set conditions can help reduce the emotional impact of trading decisions, leading to more disciplined and consistent trading.

5. Flexibility in Trading Strategies
   Traders can combine different types of working orders to create complex and sophisticated trading strategies, enhancing their ability to respond to various market scenarios.

6. Time-Saving
   Since working orders can execute trades automatically when certain conditions are met, traders can save time and focus on other important tasks or strategies.

7. Market Opportunities
   Working orders can capture market opportunities that may occur when traders are not actively watching the market, ensuring they don’t miss out on potential trades.

8. Custom Expiry Options
   Traders can set different expiry dates for their working orders, such as same-day or good 'til canceled, providing flexibility in how long their orders remain active. By using working orders, traders can enhance their overall trading experience, making it more efficient, controlled, and strategic.

Difference between working orders and market orders

Market orders and working orders are two types of trading orders that have different advantages and disadvantages for traders.

Different advantages and disadvantages

Reducing the necessity for constant market monitoring

Anastasiia Chabaniuk Author, Financial Expert at Traders Union

Working orders are an essential tool in a trader's arsenal, providing benefits that enhance trading efficiency and strategy execution. Unlike market orders, which execute immediately at the current market price, working orders are placed on the order book to be filled when specific price or time conditions are met. This strategic delay allows traders to aim for optimal entry and exit points, ensuring they trade at their preferred prices rather than accepting the prevailing market rates.

As I have noticed in my practice, one of the key advantages of working orders is their ability to reduce the need for constant market monitoring. By automating the execution based on predefined criteria, traders can manage their positions more effectively, even when they are not actively watching the markets. This is particularly beneficial in volatile markets where rapid price movements can occur.

If you understand and effectively utilize working orders, you can significantly improve a trader's ability to navigate the financial markets successfully.

Summary

Working orders are powerful tools that can help you trade more efficiently and profitably. With working orders, you can set specific price and time conditions for when to start or stop a trade. This means you don’t have to watch the market constantly. These orders also help you manage risk better.

You can combine working orders with other types of orders to create more advanced trading strategies. It’s important to learn about the different types of working orders and how they work and choose the ones that best match your trading goals and strategies.

FAQs