the hAnDbook of teChnICAL AnALySISFigure 5.31 depicts the actions of a market participant trading according to
the principle of buying low and selling high, which involves any of the four fol-
lowing scenarios:
■ (^) Buying low and selling high
■ (^) Buying high and selling higher
■ (^) Selling high and buying back lower
■ (^) Selling low and buying back even lower
orders for entering and exiting a position
There are two basic types of orders that will allow traders to participate in the
market:
■ (^) Stop Entry and Stop Exit Orders: Essentially, stop orders are instructions to
enter or exit a market immediately, at any price. A stop order cannot guar-
antee that an order will be executed, or filled at the specified price, but it can
guarantee execution. When entering the market at the current price, we use
a market order. Stop entry and stop exit orders may be placed in the market
as pending or working orders. Once triggered, all stop entry and stop exit
orders turn into market orders. Orders can also be placed instantaneously as
market orders. For entry, either a buystop or sellstop order may be placed. For
exiting if price moves adversely against a position, a stop exit order may be
employed, normally referred to as a stoploss order. Pending stop entry orders
are usually placed when a continuation in price is expected. Stoploss orders
may experience additional loss under gapping price action due to negative
slippage. Slippage is the difference between the specified order price and the
actual filled price.
■ (^) Limit Entry and Limit Exit Orders: Limit orders are instructions to enter or
exit a market at a specified price, or better. If the broker cannot fill the order
at the specified price or better, the order will not be executed. Hence, limit
figure 5.31 Participating in the Market via the 4 Basic Entry and Exit Orders.