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Task №6 part 2. Order execution via MT4 trading platform

Let’s go back to our sixth lesson and open another deal. We are going to set stop loss and take profit and leave the position open to monitor the situation in the MetaTrader information field.

We opened a long position at the level of 1.4497 (ask) since the EUR/USD pair showed an increase. In other words, we bought the underlying asset.

The described conditions resemble those of the first deal. However, figures in the Balance and Free Margin fields change according to the profit received from the previous deals. In this case, it is possible to open buy orders. Margin is calculated depending on the current quote of the EUR/USD pair. Thus, the margin is 144,97 as the ask price equals 1.4497.

It is recommended to put orders to limit losses and fix profits. Your position will be closed as soon as the price hits the indicated levels. Use the right button of your mouse to open the contextual menu and select Modify or Delete Order.



Let’s look at the example of placing stop loss and take profit when the pair reached the following readings: Bid=1.4493 and Ask=1.4496.

It is obvious that the new target levels of 1.4498 and 1.4499 appeared. Thus, when the bid price reaches the levels of 1.4489 or 1.4499, a broker will have to make an opposite deal and sell the asset.  (A long position can be closed only at the bid price.)

This action will lead to changes only in the Positions table.

Price levels indicated while setting the stop loss and take profit orders appeared in the corresponding columns. You can be sure that the broker will close your position after the price approaches these levels. The stop loss order limits our risks, and if the euro declines, the losses on the open position will not exceed 3 US dollars. The profit fixed by the take profit order will not be more than 5 US dollars. You may have a question: why do we need to fix profit? It is obvious that the price cannot move only in one direction (up or down). When the price hits a particular level, it makes a reversal and starts moving in opposite direction. Making an analysis, it is very important to determine not only levels that limit losses, but also target levels achieving which a price can dramatically change its direction. Besides, you should lock in your profit in time to avoid the situation when a profitable position turns into a lose one. Thus, take profit order will fix your gains when the price reaches a particular level.

Moreover, you do not have to be in front of the computer and monitor the market movement as such orders are executed by brokers. It is noteworthy that all limit orders (take profit, stop loss or any pending order to buy or sell) are carried out without slippages.
What does a slippage mean? Let’s look at it in detail. A slippage is a difference between a set price and a price at which a particular order is performed. For example, a trader placed stop loss for a long position at the level of 1.4489. In case of a slippage (ignored by most brokers), the order can be executed with the error of 1-3 pips or even more. Thus, the price can be 1.4488, 1.4487 or 1.4486 that increases possible losses. According to our company’s rules, orders are carried out only at the price set by a trader, even if there is strong market volatility.

As a rule, stop loss is placed below the open price for a long position and above it in case of a short position. It is explained by the fact that these price zones are risky in terms of losses.

Take profit is usually set above the open price for long positions and below it for short positions. Profit can be fixed if a price moves further in these particular directions.

We advise you not to close a position, i.e. not to perform an opposite deal, the day you open it in order to monitor changes in information window of the MetaTrader platform.

The euro depreciated and the EUR/USD pair approached 1.4486(bid)-1.4489(ask). It is below the stop loss level. Thus, the open long position should have been closed.  If you do not see any records in the Positions table, the deal was closed by the order execution. Let’s open the history of your account and examine the results of all conducted operations.



To get the information, set the time frame from 01.09.2009 to 11.09.2009 in the Account History window and click OK.

In the first line you can see a pair on which a deal was opened.

In the Profit line you can see -13 that is a sum of 13 US dollars (after the position was closed at 1.4489 by the stop loss order) and a commission for the position rollover – swap. According to the rules, if you roll over a position on the first day, the commission is 0.55. In the example, the position was rolled over on the 5th day. Thus, the profit is

257,0+5*0,55=259,75

Pay attention at the line “profit/loss”. -13 is profit (there is “-“ sign). As it was mentioned above repeated purchase of the asset (EUR) was made at a price 1.3579, this means that calculations for order stop-loss should be made according to this price.

+10000 eur -14497 usd
-10000 eur +14498 usd
0 8 usd

This figure is fixed in the line “Profit/Loss” and taken into consideration while calculations of the sum, it is reflected in the field “Current balance”. Total loss is 30; calculations of the balance:

5000-30=4970

Trading via the MetaTrader4 platform market participants can carry out deals using both market and limit orders. A limit order is a buy or sell order sent to a broker. Such orders are executed after an asset approaches the indicated price. To place a limit order, first of all, you should click Order and in the Type field choose Pending Order. Then, you should select a price of the deal execution, the deal type ( buy or sell), and expiry date. In the example, we have chosen the Buy Limit order.

By means of limit orders you can open and close positions, use these orders as stop loss and take profit, and reverse trades. A reversal via limit orders as well as via market orders will be implemented in case you indicate volume which exceeds the open deal size.

For example, a trader opened a long position on the GBP/USD pair with the deal size of 10,000 and at the price of 1.8000. Some time later, the trader decided to change the deal type because the price reached the targeted level and there was a risk of the trend reversal. Thus, it was necessary to set the sell order with the deal size of 20,000 that exceeds twice the sum of the open position. The deal was executed at the price of 1.8050. Let’s look at the balance table:

+10000 gbp -18000 usd
-20000 gbp 36100 usd
-10000 gbp +18100 usd

The trader’s position remained opened. However, the short position was opened just after the long one was closed.

Apart from the mentioned orders, the MT4 users can benefit from trailing stop. We are not going to discuss it in detail; it will be your own research. There is a lot of information in the MT4 User Guide which can help you easily understand the main principles of trailing stop.

Questions for revision
  1. What is a trailing stop order?
  2. How to set trailing stop?
  3. Try to open a deal on any pair you like. Leave it opened until next trading day.
  4. Describe changes in the MT4 information field after the position rollover. Explain the reasons.
  5. Indicate a price range for placing stop loss and take profit for long and short positions? Provide a good example.

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