Pending orders are powerful tools in MetaTrader 5 (MT5) that allow traders to set specific conditions for opening or closing a position in the future, without needing to monitor the market constantly. They automate trading decisions, helping to execute strategies precisely and manage risk effectively.

What Are Pending Orders?

A pending order is a client request to open or close a position when the price reaches a specified level. Instead of executing a trade immediately at the current market price, a pending order waits for the market to move to a predetermined price point. According to RannForex, the Ask price activates a buy order, and the Bid price activates a sell order. This functionality is crucial for traders who wish to enter or exit positions at specific levels, even when they are away from their trading terminal.

Types of Pending Orders in MetaTrader 5

MetaTrader 5 offers six primary types of pending orders, each designed for different trading scenarios:

Limit Orders

  • Buy Limit: An order to buy at the specified price or lower. This is typically placed below the current market price, anticipating a price drop before a reversal upwards.
  • Sell Limit: An order to sell at the specified price or higher. This is typically placed above the current market price, anticipating a price rise before a reversal downwards.

Limit orders are used to enter the market at a more favorable price than the current market price.

Stop Orders

  • Buy Stop: An order to buy at the specified price or higher. This is typically placed above the current market price, anticipating a breakout and continuation of an upward trend.
  • Sell Stop: An order to sell at the specified price or lower. This is typically placed below the current market price, anticipating a breakdown and continuation of a downward trend.

Stop orders are used to enter the market once a certain price level is breached, often confirming a trend.

Stop Loss and Take Profit Orders

Unlike Buy Limit, Sell Limit, Buy Stop, and Sell Stop orders which open new positions, Stop Loss and Take Profit orders are designed to manage existing open positions.

  • Stop Loss: An order to close an open position to limit potential losses. For a buy position, it closes at a price lower than the market price. For a sell position, it closes at a price higher than the market price. The execution rules for Stop Loss orders are analogous to those for Buy Stop and Sell Stop orders.
  • Take Profit: An order to close an open position to secure profits. For a buy position, it closes at a price higher than the market price. For a sell position, it closes at a price lower than the market price. The execution rules for Take Profit orders are analogous to those for Buy Limit and Sell Limit orders.

Both Stop Loss and Take Profit orders have a 'Good Till Cancelled' (GTC) status, meaning they remain active until executed or manually cancelled. Other pending order types (Buy Limit, Sell Limit, Buy Stop, Sell Stop) can also have a GTC status or a 'Good Till' (GT) status, allowing clients to set an expiration time.

Trailing Stop

A Trailing Stop is an advanced Stop Loss order that automatically adjusts its level as the market moves in a profitable direction. It works only when the client's MetaTrader 5 terminal is launched. The Trailing Stop aims to maximize profit by moving the Stop Loss level to follow the price, maintaining a specified distance. However, it does not guarantee exact placement according to tick history, as the activation results in a request to modify the Stop Loss level, similar to a client-sent order.

How Pending Orders Work in MT5

The execution of pending orders involves several stages:

  1. Activation: Once the market price (Ask for buy, Bid for sell) reaches the specified level of a pending order, it becomes active.
  2. Margin Check: Upon activation, the server checks for the required free margin. It's important to note that free margin is calculated at the moment of execution, not at the moment the order is placed. This means the required margin might differ from what the client initially anticipated.
  3. Sending to Provider: If sufficient margin is available, the order is sent to the liquidity provider with the best price at that moment for execution. During this period, the order is blocked on the server and cannot be cancelled.
  4. Execution Confirmation: After receiving a response from the provider, the server unblocks the order and confirms execution at the price received. For Limit orders, the real execution price may be better than the requested price. For Stop orders, the real execution price may differ from the price in the order.
  5. Partial Execution: In cases of partial execution, the client receives confirmation for the executed part, and the unexecuted portion of the order is automatically set again with the same parameters.

The execution time for orders can vary depending on factors such as market volatility and available liquidity, potentially increasing during periods of high activity.

Understanding and utilizing pending orders effectively in MetaTrader 5 can significantly enhance a trader's ability to manage their positions and execute their strategy with precision. For more details on order types, you can refer to the MT5 Order Types Explained article.