From the previous lesson you have found your trading opportunity. In this lesson, you will learn that this opportunity only becomes an actual trade if a certain price level is reached.

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A pending order is a potential trade that will only trigger if the level that the trader has entered has been hit by the price.

Instead of waiting in front of your screen for that price level to be reached, you can use a pending order. A pending order is a potential trade that will automatically trigger, but only if the price level that you have chosen has been reached.

Go to either of the following instructions, depending on which market direction:

Market direction is up: enter a pending buy stop order

When you have determined that the market direction is up, then you will look to enter a "pending buy stop" order. In order to do so, you will need to set your entry price, stop loss, profit target and position size.

Check the news

You must make sure that before and after you have entered your pending order that you check for any news that can be released that may affect your trade.

A good source for upcoming news events for the day and week ahead can be found by looking at our economic calendar:

If there is any news or reports that are due to be released then you should not place a trade.

News and data releases can cause volatility to greatly increase and change the market direction suddenly or cause the trade to hit your stop loss. If you are already in a trade you should close your trade 5 minutes before a news event as this will help reduce your risk significantly.

Set the entry price based on the last up fractal

Find the last up fractal, place a line at the high of the price just below the fractal. This line is the price at which you will enter the market and hence, the entry price you enter into your pending order.

The blue line in the chart below shows the price you will enter for your pending buy stop order in MT4.

When the price gets to this level, the pending order will automatically enter you into the trade.

Entry price market up

number_1 Last down fractal
number_2 Price breaks the last down fractal number_1, indicating the trading opportunity
el3 Pending buy stop entry at 1.31001
number_4 Next pivot point up from the entry price

Enter the stop loss based on the last down fractal

Find the last down fractal and place a line at the tip of the fractal — this is where your stop loss will be. The red line in the following chart shows the price where you will enter your stop loss.

Stop loss market up

el1 Pending buy entry when price crosses the high of the last up fractal
sl2 Stop loss placed at the tip of the last down fractal at 1.30825
number_3 Next pivot point up from the entry price

Enter the profit target using the pivot point

Find the next pivot point up from the entry on your chart — this is the profit target. The green line shows the price you will enter for your profit target.

Pivot point market up

el1 Pending buy entry when price crosses the high of the last up fractal
sl2 Stop loss placed at the tip of the last down fractal
tp3 Profit target at 1.31265 — the next pivot point up from the entry price

You should note, however, that if the profit target is less than 5 pips away, then you should target the next pivot point up. This ensures that you incorporate the spread into your target and that you maintain a reasonable risk to reward ratio

At midnight, the pivot points change. The new day will have a new set of pivot points based on the now previous day's data. In this event you will have to adjust your profit target to the next new pivot point up.

The following chart shows what the change looks like:

Pivot points change at midnight
number_1 Previous pivot point where target would have been
number_2 New pivot point up - this is where you would need to adjust your stop loss too.

Enter the volume based on your account size

For every $100 that you have in your trading account, you should trade 0.01 lots rounded down (based on trading a major currency pair, with the USD as the quote currency).

Never leave your trades open over the weekend. If you still have an open order on Friday at 18:00 GMT, close your trade.

For example, if you have $450 in your account, you would trade with a volume of 0.045 which you would round down to 0.04.

If your account is denominated in a currency other than US dollar, then simply calculate the equivalent amount of US dollars in your account using the current exchange rate and base your position size on that.

Now place the pending order

Entering the pending order Show instruction

Take spread into account

Incorporating the spread into your order Show instruction

Next step

Now that you have entered the pending order, move to the next step in order to manage it.

Lesson
Before your order turns into a trade, you need to monitor it. Adjust the entry point and the stop loss. If the market direction changes, cancel.
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Market direction is down: enter a pending sell stop order

When you have determined that the market direction is down, then you will look to enter a "pending sell stop" order. In order to so, you will need to set your entry price, stop loss, profit target and position size.

Check the news

You must make sure that before and after you have entered your pending order that you check for any news that can be released that may affect your trade.

A good source for upcoming news events for the day and week ahead can be found by looking at our economic calender:

If there is any news or reports that are due to be released then you should not place a trade.

News and data releases can cause volatility to greatly increase and change the market direction suddenly or cause the trade to hit your stop loss. If you are already in a trade you should close your trade 5 minutes before a news event as this will help reduce your risk significantly.

Set the entry price based on the last down fractal

Find the last down fractal, place a line at the low of the price just above the fractal. This line is the price at which you will enter the market and hence, the entry price you enter into your pending order.

When the price gets to this level, the pending order will automatically enter you into the trade.

Short entry market down

number_1 Last up fractal
number_2 Price breaks the last up fractal number_1, indicating the trading opportunity
es3 Pending sell entry at 1.31032
number_4 Next pivot point down

Enter the stop loss based on the last up fractal

Find the last up fractal and place a line at the tip of the fractal — this will be where your stop loss is. The red line in the following chart shows where you will place your stop loss.

Stop loss market down

es1 Pending sell entry when price crosses the low of the last down fractal
sl2 Stop loss placed at the tip of the last up fractal at 1.31170
number_3 Next pivot point down

Enter the profit target using the pivot point

Find the next pivot point down from the entry on your chart — this is the profit target. The green line shows where you will place your profit target.

Pivot point market down

es1 Pending sell entry when price crosses the low of the last down fractal
sl2 Stop loss placed at the tip of the last up fractal
tp3 Profit target at 1.30883 — the next pivot point down

You should note, however, that if the profit target is less than 5 pips away, then you should target the next pivot point down. This ensures that you incorporate the spread into your target and that you maintain a reasonable risk to reward ratio

At midnight, the pivot points change. The new day will have a new set of pivot points based on the now previous day's data. In this event you will have to adjust your profit target to the next new pivot point down.

The following chart shows what the change looks like:

Pivot points change at midnight down
number_1 Previous pivot point where target would have been
number_2 New pivot point down - this is where you would need to adjust your stop loss too.

Enter the volume based on your account size

For every $100 that you have in your trading accout, you should trade 0.01 lots rounded down (based on trading a major currency pair, with the USD as the quote currency).

Never leave your trades open over the weekend. If you still have an open order on Friday at 18:00 GMT, close your trade.

For example, if you have $450 in your account, you would trade with a volume of 0.045 which you would round down to 0.04.

If your account is denominated in a currency other than US dollar, then simply calculate the equivalent amount of US dollars in your account using the current exchange rate and base your position size on that.

Now place the pending order

Entering the pending order Show instruction

Take spread into account

Incorporating the spread into your order Show instruction

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  • Hi!

    1)
    In the video about 01:00, you say we take the 1.26862 + 1pip(false breakout) + 2pip(spread) = 1.26892
    And you say on the video that we should buy 1.26893. Could you tell me what do i misunderstand, please?

    2)
    Why exactly 1 pip is good to prevent false breakouts? Did you count it by algorythmic trading or how?


    Thank you,
    elekadammate
  • Hello,

    What pivot point indicator you are using? And where we can get it?

    Thank you
    Taifoon
  • Hi elekadammate,

    Thank you for you questions. In the video, our trader has entered the correct amount. Of course 1.26862 + 3 = 1.26892, our traders has entered 1 pippet above to be extra safe. This is not necessary, is it simply what he has chosen to do in this situation.

    1 pip above the entry is good because it means that the price has definitely broken the fractal and the break is not false.
  • Hi taifoon,

    The point indicators that we use are custom made, please feel free to download them. You can also down load our tradimo template if you want to as well
  • I have two questions about the section "Enter the volume based on your account size".

    1. Why is the quote currency used to calculate the volume when the base currency is being bought?

    2. Is there an implicit assumption on the leverage? I'm not sure how this corresponds to the idea of only risking around 1% on a single trade.
  • Sorry, I did something wrong wiht this post. Please delete this post. I suggest the feature to delete post.
  • "Enter the volume based on your account size"
    Let say, I deposit $100 then I lose and it is now less than $100. How much to enter the volume? May I enter 0.01 if I have $250 on my account? May you explain the idea to enter 0.01 for every $100? Thanks.
  • JHTAN:

    Ad currency terminology: Please go through this links for quote currency and base currency.

    Ad your Money Management question: With less then 100usd your account is really stretched, so it is hard to trade with it with reasonable Money Management. Please look at this video to see How Much Money You Need to Start Trading , I believe it answers your question in understandable way smile
  • bencoy81:
    I have two questions about the section "Enter the volume based on your account size".

    1. Why is the quote currency used to calculate the volume when the base currency is being bought?

    2. Is there an implicit assumption on the leverage? I'm not sure how this corresponds to the idea of only risking around 1% on a single trade.

    Hey bencoy81

    Question 1

    This is always a topic of confusion. How is it that we work out our own money management and/or the pip value is in the quote currency when we are buying the base currency?

    We base our calculation on the quote currency, because it is the quote currency that moves in relation and this means that the pip value lost or won is in the quote currency. Because the pip value movement is the quote currency, this is the amount of currency that is entering or leaving our account.

    The next question would then be, how the hell can this be? We are buying the base currency so this can't make sense!

    Ok, so lets break it down:

    When you buy a standard lot, you buy 100,000 units of the base currency.

    Lets say that you buy one standard lot of the EUR/USD and the price is 1.3000

    This means that you have purchased €100,000 with $130,000

    Now lets say that the price goes up to 1.3001. That means that your €100,000 is now worth $130,010. So if you close your position, you have actually made $10 because $130,0010 - $130,000 = $10. The price moved by one pip, but it is worth $10.

    So as you can see, even though the standard lot is buying 100,000 units of the base currency - in this case the euro, the pip value is quoted in the dollars, which is how you buy a standard lot in euro, but the pip is in dollars.

    So because the value of the pip comes in and out of you account, it is the dollar amount that you need to base your risk on.

    Question 2

    It is not assuming the leverage, it is stating how much leverage to use. By only entering 0.01 lots for every $100 you have in your account, you are essentially making sure that you stay within a 2% risk parameters almost all of the time. The idea is that because it can be quite difficult in the beginning to work out position sizes, we wanted to give you a general way of working it out and then once you have learned with the beginner strategy, you can go onto more advanced things - including working out your position sizes based on your stop loss, trading capital, currency denomination etc.
  • Hi!

    In the Take spread into account section you suggest to add the spread to the entry when buying and to the target when selling.
    If I understand correctly, you have to add the spread to all buy type orders.
    In case of selling, the stop loss is a buy type order, too.
    Is right to add the spread to the stop loss when selling?
    Or is there a reason to not do so?

    Thank you for the great tutorials!

    ρ(h)o
  • I am continually getting messages of "invalid S/L or T/P" when I try to place a pending order.
    The in-client help files are not getting me anywhere. Does anyone know why I'm getting this message, and how to solve it?
  • rho:
    Hi!

    In the Take spread into account section you suggest to add the spread to the entry when buying and to the target when selling.
    If I understand correctly, you have to add the spread to all buy type orders.
    In case of selling, the stop loss is a buy type order, too.
    Is right to add the spread to the stop loss when selling?
    Or is there a reason to not do so?

    Thank you for the great tutorials!

    ρ(h)o

    Hey Rho

    Yes you are completely right, getting out of a sell position is a buy order. So why do we not add the spread? Well you of course can if you want. We choose to put the stop loss at the tip of the fractal.

    Lets consider the optimal point to put a stop loss. Ignoring the bid/ask price difference on MT4 for now, you would want to put the most optimal place above the highest price at which the buyers were wiling to buy at, and the lowest place the sellers were willing to sell at.

    Now, this would generally be just fractionally above the swing high or below the swing low. If the buyers were willing to buy higher than the high of that price then you are wrong in your decision - no problem, you get stopped out and you live to see another day.

    The same with the swing low, if you put your stop loss below the swing low and then you get stopped out, then it seems like the sellers were willing to sell below that low after all.

    So ideally, we would actually put the stop losses just above or below these levels. But what happens, more often than not, is that the markets come and just take us out at our stop loss and shoot in the original direction of your trade. Or (putting the spread back in) you have to account for the bid and ask difference.

    Using the tip of the fractal

    Well, because as beginners it is difficult to be disciplined. You find yourself asking questions like "well, what's the harm in putting my stop loss just a teeny weeny bit higher?" And then before you know it, you are putting your stop loss 5- 10 pips higher than you should be. So the fractal tip gives you some discipline to make sure that you are just giving you self enough breathing room for the price, but that you don't have to make a judgement on how much breathing room.

    So back your original question, should you add the spread? You can do, there is no harm in doing so, the choice is ultimately yours.
  • iamlord:
    I am continually getting messages of "invalid S/L or T/P" when I try to place a pending order.
    The in-client help files are not getting me anywhere. Does anyone know why I'm getting this message, and how to solve it?

    Hey iamlord

    There may be two reasons for this that I can think of, 1) your broker has a minimum stop loss distance which stops you putting your stop loss within a certain amount.

    With the TP order, it may be the case that you have the order the wrong way around.

    Can you upload a screen sot of your order window and then we can take a look? We'll try and figure this out one step at a time.
  • Is it just me or can any programmed bot do this work for us? Or is there something im missing?
  • Hello,

    I see green line in the chart of my computer. Is that pivot line? http://goo.gl/laUZ8
    Is that pivot line always on top or on bottom?
    I am using a 11' laptop. Is that anything in the bottom of the MT4 is not display in my screen?

    Thanks.
  • JHTAN:
    Hello,

    I see green line in the chart of my computer. Is that pivot line? http://goo.gl/laUZ8
    Is that pivot line always on top or on bottom?
    I am using a 11' laptop. Is that anything in the bottom of the MT4 is not display in my screen?

    Hey JHTAN, I can't see the pivot levels on your chart. This is how your chart should look like with pivot levels, just click on the link:
    CHART

    HERE you will find how to install and load the pivot point indicator on your charts.
  • Hi Orlando,
    I see so many lines on the chart. which one is the pivot level?
    The pivot level is the green line? So many green lines on the chart!?
    what is mean by PP, S1, S2 and S3?
    Thanks.
  • PP is center Pivot, then S1,2 and 3 are Daily supports. The dotted lines are mid pivots.

    We have a coaching session today about the beginner strategy, I'll be going through a few trades, you should defenitely stop by: coaching
  • "Take Spread Into Account: If your profit target is 1.2025 when selling, then you should actually place your profit target at 1.2027."

    I've noticed that this moves the TP up, shortening the TP distance. Is this proper, or is it supposed to be added to the direction of the order(down), making the TP 1.2023?

    Thx.
    Steve.
  • Hello Everyone
    Will be posting a noobish question
    I just made a demo account with Markets.com and using Metatrader4 with tradimo layout and Indicators
    Whenever i try to place a pending order i get this
    Open price you set must differ from market price by at least 80 pips

    can someone briefly explain this to me

    Thank you

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