TRANSACTION,TRADE. ORDER, TRANSACTION, POSITION. TYPES OF ORDERS

LOT AND TRANSACTION

As we said before, the biddings at the financial markets are carried on with standardized by volume parts. These standard parts (volumes of supplies of financial instruments) are called lots. One standard lot at the Forex currency market is equal to 1 000 000 (one million) units of basic currency. For example, if we take currency pair EURUSD, then in buying transaction 1 000 000 (one million) euro will be obtained with corresponding quantity of dollars. If the price of buying is 1.38997, then 1 389 970 will be needed to obtain 1 000 000 euro.

Several lots make together total volume of transaction. For example, 10 lots is a volume that is equal to 10 000 000 (10 mln) units of obtained currency. Broker companies also give an opportunity to operate with fractional (mini- and micro-) lots. In particular, LiteForex company considers 100 000 as a standard lot and allows traders to open transactions at volume of 0.1  lots ( 10 000 units) and 0.01 лота (1 000 units).

And now let us meet with buy and sell transaction in details. Each transaction (also known as full transaction) consists of two transactions: opening and closing. Closing of the transaction is always an opposite action to the opening. For example, if a transaction was opened by a purchase, then it must be closed with a selling, and vice versa: if the opening of the transaction is a selling, then its closing will be a purchase. For more details read chapter 2.1 "Price and spread" part "Technical analysis".

TRADE. ORDER, TRANSACTION, POSITION. TYPES OF ORDERS

The process of trading at Forex may be divided into two parts: "Waiting" and "Trading". These parts interchange permanently. It is not possible to trade constantly (just because every strategy has periods when it makes sense to enter the market, and when it is better to be outside). However during the period of "Waiting" it is not necessary to idle. As a rule during "Waiting" trader makes an analysis of the market (see chapters II and III), keeps count and analyses his past transactions (correction of mistakes).

Here we will describe the process of trading in details and describe stages of life of any transaction. Each buying and selling operation in currency contract (sometimes it is called full transaction) consists of the following stages:

• setting order by trader (via electronic trading system of a broker company in order to do that or this action is sent; the types of orders will be described later);
• fulfillment of order by broker company (as a result of fulfillment of order) upon condition that the order is set correctly and can be fulfilled in current trade conditions, basically, a transaction takes place. 
• one or several such transactions (they are called opened transactions or opened orders) compose the position of a client at the market.
• position has so-called "floating " result - it reflects at such characteristic as "Means"
• while order is still opened, a trader may that or this way modify it;
• transaction is closed with that or this order, and the operation of closing of a deal is always opposite to the operation of an opening;
• as a result of closing of transaction its financial result reflects in balance, and record is added to the history (statement), where it transforms into closed order.

Described life cycle of an operation is the ideal variant that is shown on the picture. In reality it must be take into consideration that not all setting orders bring to the opening of transaction. Fulfillment of an order also has its nuance. Besides the closing of the transaction can be declined because of the situation where the quantity of available means at the deposit is not enough for supporting the position (margin call or stop-out), and not as a result of a fulfillment by a broker an order, set by a trader. In our course however we will not describe all the details. It is a task of other special courses of our company.

General types of orders:

• market is an order of trader to broker to fulfill a transaction for current market price. We can mark out next subtypes of market order:
  • marketbuy - to open a transaction for purchasing at current price ask;
  • marketsell - to open a transaction for purchasing at current price bid;
  • marketclose - to close a transaction at current market price (purchase transactions are closed with selling at bid price, selling transactions are closed with purchase at ask price);
• gtc (pending order) - order to broker to fulfill a transaction under some conditions. There are next types of pending orders:
  • Buy stop - to open a purchase transaction under condition that the price overcomes certain level in order in its movement from bottom to top (to buy at trend);
  • Buy limit - to open a purchase transaction under condition that the price  reaches a certain level in its movement from top to bottom (to buy at kickback);
  • Sell stop - to open a purchase transaction under condition that the price overcomes a certain level in its movement from top to bottom (to sell at a trend); Picture 3: The difference between line and exponential profit; 
  • Sell limit - to open a purchase transaction under condition that the price reaches a certain level in its movement from bottom to top (to sell at kickback);
• stoploss (pending order, that does not exist separately from "basic" order position) - order to broker to close position after reaching a certain level of losses (to cut losses). For purchase position stoploss can be only below the current price, and for the selling position stoploss can be only higher the current price. In case if there is a floating profit in the position, then stoploss order may be set in the loss area at the level of opening (this will bring to result when the transaction reliably will not be unprofitable), and in profit area (this will allow to close the position if floating profit will start to decrease);
• takeprofit (pending order, that does not exist separately from "basic" order position) - order to broker to close position after reaching a certain level of profit. This order allows to fix a floating profit in the position, reflecting it in balance. For purchase position takeprofit may be only higher than current price, and for selling position - only lower than current price. In case if the current result in the position is unprofitable, then takeprofit may be set both in loss area (this will allow to close transaction as soon as profit will decrease) and opening level (this will allow to bring the transaction to the position when it will be profitable).

It is recommended to meet with corresponding statements about regulations of realization of the trading operations of your broker, to learn more about types of orders and about peculiarities (conditions) of its fulfillment.