Market orders, limit orders and stop loss placement

Question

Hi Anna, I hope you are doing well. Let me preface this email by saying that I am currently reading your book Forex for Beginners and nearly completed your book about VPA as you recommended so, it’s ok to answer my questions with the response “keep reading”. It seems to me that VPA is best used for market orders and no so much with limit orders. Is this correct? Also, since I’ve primarily in my past only done limit orders based on support and resistance I’ve been challenged trying to time my entry based on VPA. just this morning I jumped in too soon and was stopped out. And later in the day the pair AUDUSD moved in the predicted direction. Any advice on timing the entry better? Do I need to reprogram myself and enter trades that may be out of my support and resistance zones? Thanks so much.

Answer

Many thanks for your email and thank you for investing in my books, which I hope you are continuing to read and enjoy:)

With regard to your question – I have never used a limit order in my entire trading career, only market orders. Part of the reason is that I have always been able to be in front of my screen all day, ( I am very lucky) so have never felt the need to use LMT or other orders. I do accept of course that not everyone is as fortunate as me, and there is a place for all these types of orders, along with the trailing stop. For me however, when I decide to enter the market I like to get in – I guess it is a personal thing. If we take a simple example such as a breakout. The market has been in congestion, then the first candle breaks well above the recent resistance in a bullish move. Now we are looking to enter and open with a market order, with the stop loss BELOW the recent floor of support – a natural area of price protection.

Stop loss placement is an art not a science and the market gives us natural barriers to place our stops – above or below the support/resistance regions in congestion. So they are great for stop loss position and management as well as for possible pause and reversals etc. Many traders believe that volume price analysis stops at an analysis of the volume price relationship. It does not. VPA embraces the other building blocks of technical analysis including candles, candle patterns and support and resistance. This creates a complete methodology which then underpins all your trading decisions.

Support and resistance is one of the cornerstones. These phases of price action are where trends are created and borne. Many traders become frustrated when markets move sideways, but these are the most exciting areas of price action. All that’s required is patience. Its not a question of if, but when, and any move away is then confirmed with VPA. These then become the perfect place for positioning your stop loss, either above or below, as long as this does not breach your risk and money management rules.  I hope the above helps and I would try using market orders once your analysis suggests its time to enter. You are more in control rather then waiting for a limit order to be triggered. Hope this helps and thanks once again

About Anna 1027 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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