Buying and Selling at the Current Market

By Kathleen Brooks, Brian Dolan

Many traders like the idea of opening a position by trading at the market as opposed to leaving an order that may or may not be executed. They prefer the certainty of knowing that they’re in the market. Actively buying and selling is also what makes trading as fun and exhilarating as it is hard work.

Deciding whether to enter now (at the market) or wait for better price levels (using orders) depends greatly on the nature of your strategy. If you’re aiming to trade short term (minutes/hours) on news or economic data reports, for instance, you’re going to be trading mostly at the market. If you’re looking to position for a larger price adjustment over the next day(s), you’re better off using orders to execute your market entry.

For short-term trade entry at the market, you want a good handle on the recent price action, which means knowing where prices have been over the past several hours. Just because you’ve settled on a strategy to buy USD/CAD doesn’t mean you have to close your chart window, open your trading platform, and pay the offer.

Take a step back and look at shorter-term charts, such as 5 or 15 minutes, to get an idea of where prices have been trading recently. Chances are you’ll observe a relatively narrow range of price action, typically between 20 and 30 pips. Unless the situation is urgent, a little patience can go a long way toward improving your entry level. Why buy at 1.0550 when you have a viable chance to buy at 1.0535?

Let the routine price fluctuations work to your advantage by trying to buy on downticks and sell on upticks in line with your overall strategy. Selecting your trade size in advance helps — so when the price gets to your desired level, you need to click only once to execute the trade.

You can also use limit orders to buy or sell just a few pips from the current market, letting the broker’s platform execute automatically in case the price moves are too quick to click and deal manually.

As you watch the price action, keep a disciplined entry price in mind, both in your favor and in case prices start to move away from your desired entry level. If the market cooperates and moves to your desired trade entry price, stay with your plan and make the trade.

If prices move away from you, have a worst-case entry level in mind and be prepared to pull the trigger so you can still execute your overall strategy. You may not be able to enter at better prices every time, but we think you’ll be surprised how often you can.