A pending order is an order that is automatically executed when the market price reaches a specific level. Pending orders help traders enter positions at precise prices without constantly monitoring the market.

Pending orders are categorized into Limit Orders, Stop Orders, and Stop Limit Orders:

1. Limit Orders

Used to enter a position at a more favorable price than the current market.

• Buy Limit:
  • Price is set below the current ask price.
  • Executes only if the market price falls to or below the specified level.
  • Used when expecting a rebound after a price drop.
• Sell Limit:
  • Price is set above the current bid price.
  • Executes only if the market price rises to or above the specified level.
  • Used when expecting a decline after a price rise.

2. Stop Orders

Used to enter a position when the market moves beyond a certain price.

• Buy Stop:
  • Price is set above the current ask price.
  • Executes only if the market price rises to or above the specified level.
  • Used when expecting a continued upward movement.
• Sell Stop:
  • Price is set below the current bid price.
  • Executes only if the market price falls to or below the specified level.
  • Used when expecting a continued downward movement.

3. Stop Limit Orders

Combines stop and limit orders to control the execution price.

• Buy Stop Limit:
  • Stop price is set above the current ask price.
  • When triggered, a buy limit order is activated at your limit price (or lower).
  • Used to follow an upward trend while avoiding entry above an acceptable price.
• Sell Stop Limit:
  • Stop price is set below the current bid price.
  • When triggered, a sell limit order is activated at your limit price (or higher).
  • Used to follow a downward trend while avoiding entry below an acceptable price.

Pending orders give traders the flexibility to enter trades at precise levels, helping manage risk and capture opportunities efficiently.