How To Best Use Limit Orders And Set Up a Live Account in Forex Trading
In this video:
00:57 What I love about the limit order?
02:29 When Not To Take A Limit Order
04:42 What to do between demo and live account?
I'm going to share with you some information about how to best use limit orders and also how to choose a broker and transition from a demo account through to a live account, so let's get into it.
Hi Forex traders, it's Andrew Mitchem here the Forex trading coach and today is Friday the 28th of August. I've got two questions that have been sent through that I'd like to discuss on this video and podcast. The first one is here from Raphael and Raphael says, “Andrew, I've been watching you on YouTube, love your videos, love your work, but I'd like to ask you a question about the best use of limit orders, how to use them.”
I actually use limit orders quite a lot within my trading and it's generally for the longer timeframe chart, so I use them personally for anything from four hours and above. That can be a six hour charts, 12 hours, daily, weekly, even monthly charts.
What I love about the limit order?
What I love about the limit order, is it actually fills you at a better price than the current market order. Now if you are taking buy trades for example, rather than entering up here at the market order, saying, I'm placing an order below the current price to buy. If the market retraces back to that level, it fills me for a buy trade and then I'm anticipating it's going to move upwards. Exactly the same, but in reverse for a sell trade. Now the benefits of many, of course you get filled at a better price and if you know what you're doing and you have your entry at a certain level, then the majority of the time you get the price filled.
What it also does is, it generally increases the return that you make from your traders and it's in the higher reward to risk, because it means that generally you have maybe a smaller stop loss than if you'd placed your trade at the market and therefore you have potentially, because you're getting in at a better price, and potentially a far greater gain as a percentage of your stop loss, so a higher return from your trade. It also means, another great thing is, you don't have to be there right at the time, at the market, at your computer, to place the trade because, let's say you're trading let's say a four hour chart with a limit order as a retracement entry, you don't have to be there at the close of the four hour chart.
You could come a little bit later and say, well it's still not moved back to my entry order but I'm now placing that limit order at this lower level looking for, anticipating the market is going to pull back. I actually love taking limit orders.
When not to take a limit order?
The only time I wouldn't really take a limit order is anything on a shorter timeframe chart of let's say one hour or shorter, because really, let's say if you're trading a 15 minute chart, you're pretty much most of the time want to be in at the market straight away as a market order because you're really trying to ride the momentum in the market at that time to best make use of a 15 minute or even a five minute chart. Use limit orders for the longer timeframe charts.
The second question that I've got here is from Patrick and Patrick says, “Hey Andrew have you any tips or recommendations in setting up a live account. I've been practicing for the last two to three months on a demo, I'm now ready to go live but I've just heard a few stories about brokers. How can you help me?”
Patrick, first of all you've been trading two to three months on a demo before you go live. That's really good because use a demo account to iron out all those mistakes, silly mistakes that everybody makes when they start trading. Your position size is way too big, you put an extra zero so you take about five standard lots instead of 0.5 standard lots. All those silly mistakes that people make with any piece of software that's new to them, or you are getting to understand a strategy, so use a demo for that. Fantastic you've done that and now saying you're ready to go live.
All I can say is do your due diligence. Do your research on the broker that you want to place your money with. I have three on my website that I suggest and those are AxiTrader, Pepperstone, and Go Markets. All three are based in Australia, so they're not even in the country that I live in, but they are all asset-regulated and I personally have funds with them and I've sent a lot of people to them so I actually as Forex brokers go, I think they're probably as good as any. Of course if you are in the US you cannot use them. The broker that I've sent a lot of people to in the US is ATC brokers.
You can’t take my word on that I believe they're good but don't take my word on word on them. You yourself, do your own due diligence because ultimately it's your money that you need to be comfortable with those brokers. Out of four brokers that I personally use and I've used many others in the past, those are the four who I suggest to people to use if they ask for my opinion.
What to do between demo and live account?
In terms of what to do between demo and live, really once you're comfortable and you're making money on demo account don't do anything different. Try not to change anything, keep it all exactly the same. If you think you're going to open up a $5,000 live account make sure that your demo account is around $5,000, don't have like a half a million dollar account demo and then go to 5,000 live. It's just not the same, you've got to keep everything pretty much uniform so there’s transition.
Although you know deep down and in your head and in your heart that it's now real money, try not to make it too much of a jump between demo and live because if you keep doing exactly the same, in theory nothing should change. If you're making money on demo you ought to be making money on live, that's my point. Be comfortable with the broker you use, try to have a segregated account, be comfortable, do your research, have a look on the sites like Forex Peace Army and review brokers. Everybody is going to have grumbles by even the very best brokers, but overall you're going to get yourself a fairly good gauge of what is a good safe broker to put your funds with and what's probably not a good broker to put your funds with.
Check them out, give them a call, see how long it takes them to email if you ask them some questions and just really do your due diligence.
Hope that helps. Any questions that you have like these that you'd like me to answer for you in the future, just drop me an email [email protected]. Have a wonderful weekend and I look forward to talking to you this time next week.