News & Analysis
News & Analysis

Understanding Working Orders in CFD Trading

7 August 2021 By GO Markets


In the world of Contract for Difference (CFD) trading, success often hinges on one’s ability to strategically execute trades. To achieve this, traders frequently use various order types to manage their positions effectively. One such order type is the ‘Working Order,’ which plays a pivotal role in maximizing trading opportunities while minimizing risk. In this article, we’ll delve into the intricacies of working orders, how they function, and their significance in the CFD trading landscape.

A working order is essentially a trading instruction given to GO Markets to execute a trade at a specific price point or under certain market conditions. Unlike market orders, which are executed instantly at the current market price, working orders allow traders to set specific parameters for trade execution. This flexibility is a valuable tool for traders aiming to enter or exit positions at precise price levels.

The primary purpose of a working order is to automate the trading process, freeing traders from the constant need to monitor the market. By setting predetermined conditions for trade execution, traders can engage in other activities without the fear of missing out on profitable opportunities or being adversely affected by market fluctuations.

One common type of working order is the limit order. A limit order instructs GO Markets to buy or sell an asset at a specified price or better. For instance, if a trader wishes to buy shares of a CFD at a lower price, they can place a limit order below the current market price. Conversely, if they want to sell at a higher price, they can set a limit order above the current market price. The trade will only be executed when the market reaches the specified price or better.

Another popular type of working order is the stop order. A stop order, also known as a stop-loss order, is designed to limit potential losses or protect profits. A trader can place a stop order to buy or sell an asset when it reaches a certain price level. For example, if a trader holds a long CFD position but wants to limit potential losses, they can set a stop-loss order at a specific price below the current market price. If the market reaches that price, the stop order becomes active, automatically triggering the sale of the CFD.

Understanding the mechanics of working orders is crucial for traders looking to manage risk effectively. One of the key benefits of working orders is their ability to help traders stick to a well-thought-out trading plan. By setting predetermined entry and exit points, traders can avoid impulsive decision-making driven by emotions, which often leads to costly mistakes.

Moreover, working orders can be used to capitalize on market volatility. In fast-moving markets, prices can change rapidly, making it challenging to execute trades at desired levels. With working orders in place, traders can take advantage of price fluctuations without constantly monitoring the market. This level of automation not only saves time but also reduces the stress associated with day-to-day trading.

Traders have the flexibility to customize their working orders to suit their specific trading objectives. This customization includes specifying order duration. There are two primary order duration options: day orders and good ’til canceled (GTC) orders.

Day orders, as the name suggests, are valid for the trading day on which they are placed. If the specified conditions are not met by the end of the trading day, the order expires, and traders need to re-enter it if they wish to keep the trade active.

On the other hand, GTC orders remain active until they are executed or manually canceled by the trader. This means that GTC orders can span multiple trading days or even weeks, allowing traders to patiently wait for their desired price levels to be reached.

Working orders can also be contingent on other factors, such as time or the behavior of other assets. For instance, traders can use contingent orders to link their CFD trades with specific events. If a particular stock index reaches a certain level, it may trigger the execution of a working order for a related CFD position.

Traders should be aware that while working orders provide valuable tools for managing trades, they also come with certain risks. Market conditions can change rapidly, and prices may gap or move significantly from the specified order level, especially during periods of high volatility. In such cases, the working order may not be executed at the desired price, potentially resulting in unexpected losses.

Furthermore, it’s essential for traders to monitor their working orders regularly. Market conditions can shift quickly, and it may be necessary to adjust or cancel working orders if they are no longer aligned with the trader’s strategy. Neglecting to review and manage working orders can lead to unintended consequences in a dynamic market environment.

In conclusion, working orders are a valuable tool in CFD trading, offering traders the ability to automate their trade execution based on specific conditions or price levels. These orders, including limit and stop orders, help traders implement disciplined trading strategies, manage risk, and capitalize on market opportunities. However, traders should approach working orders with a clear understanding of their risks and continuously monitor their positions to ensure they align with their trading objectives. By harnessing the power of working orders effectively, traders can enhance their trading experience and potentially achieve better results in the competitive world of CFD trading.

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Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice.