Making a trade is the act of exchanging one thing for another. In the context of forex, it means that we exchange a certain amount of one currency into a certain amount of another currency, based on the current price of the currency pair. For example, if the price of the EUR/USD currency pair is at 1.30, for that we can get 1 euro for every 1.30 US dollars.
Instead of waiting for a specific price level to be reached to place your trade, you can tell the trading platform to automatically open your trade if that price level is hit. This is called entering the pending order. You tell the software where your entry, stop loss, and profit target will be and the position size or volume you want to trade with and the software does the rest. When using MT4 to enter a pending order, it is important to know that when you wish to buy, you select the type buy stop and when you want to sell, you select the type sell stop.
1. Position size/volume is how much you will buy or sell.When we refer to position size, we mean that this is the amount that you will buy or sell. We show you the correct amount to buy and sell in the following lessons.
2. A stop loss prevents you from losing all your money.
If a trade goes against you, i.e. you buy and the price of the currency pair starts to go down, a stop loss order will automatically close your trade so that you do not lose too much money. When the time comes to enter your pending order, we will show you how and where to place your stop loss before you enter your pending order.
3. A profit target is the amount of money you intend to make.