In this discussion I want to show How and When to use a Forward Order.
You got your Tip Off for an Instrument, done your Analysis and Trade Planning (Trading Blue Print) and decided on your Trigger Signal.
Now you must have patience to wait for your Trigger Signal to kick in and to execute the trade.
But, it is not always possible to watch a market 24/7. This might be the case for Intra Day as well as End Of Day trading.
Often, if your trigger is a breakout of some strong support or resistance line, the breakout may be volatile. You might be to slow to enter your trade and may then enter to late at a bad price, or not at all.
This is a good time to make use of a Forward Order. Some forward orders can be quite complicated and may be called different names on the different trading platforms. I will just discuss a simple forward order setup that I use frequently.
How a Forward order work:
The idea of a forward order is to have a Stop or Limit order in the market that will trigger if the price break a line, or touch a line, depending on your Trade Planning. You can also enter your Initial Stop Loss level and set your first Profit Taking target. It is often possible to make a Trailing Stop Loss part of the order.
If you entered this whole order structure you can walk away and know what your risks are if the trade is executed.
Most forward orders have 3 actions you may take.
1. Decide on your entry point:
If you expect prices to break a certain level before you enter you can use a Stop Order that will trigger if prices trade through your level. Remember that if price only touch the level it will not trade.
You Stop Order price should be a few pips/ticks below a support breakout, or a few pips above a resistance breakout.
Remember that your chances of getting a fill is good if the price trade through your levels, but you might get a worse price than what you entered if there is a gap open or some slippage due to volatility in price movement.
Be careful of using this order before an important market announcement.
If you would for example expect price to retrace back to a certain strong support or resistance level before you enter you will use a Limit Order.
If price retraced as you expected and touch your level you should get a fill.
In the example below you will use a Stop Order for a breakout at 1 and 4. It would have been difficult to enter these trades without a forward order.
At 2 and 3 you would use a Limit Order to enter when price touch the 100 mva. In 2 prices just briefly touched the 100 mva, without the forward order you would probably have bought at a higher price.
2. Decide on your initial Stop Loss level:
This will be a Stop Order
You can now enter your Initial Stop Loss level. It is often possible to enter your Stop Loss as a Trailing Stop Loss. If price make big moves and you are not there to take action your Trailing Stop Loss should capture some profit.
The Trailing Stop Loss should not be to close, you do not want to be stopped out if there is only a small pullback.
3. Decide on your Profit Taking levels:
This order will be a Limit Order.
You can now enter you first Profit Taking Target level. I believe it to be extremely important to take some profit (25% to 50% of your position) at the first strong support or resistance level. Not all trades will be a home run.
This is even more important if you trade Intra Day, very often this first profit you take might be your only profit for the trade.