MT4 is known for its various pending order types, but what about MT5? Between the two platforms, which one has the best option of pending orders?
MT4 vs MT5 pending orders, which one is the best? That is the question. Although the answer is far from simple, you can't deny that using pending orders can make your trading activity easier. It is a great option for traders who are still working a full-time job or are generally very busy. You don't have to wait in front of the screen watching the price moving. Just set an order and wait for them to be executed.
What is Pending Order?
In short, a pending order is an instruction to buy and sell an instrument when a certain condition the trader set is met. If a trader wants to place a pending order, they will inform their brokers that they only want their order executed when the market price reaches a level they desire.
Pending orders can be used in both MetaTrader 4 (MT4) and MetaTrader 5 (MT5). Both MT4 and MT5 pending orders are divided into two categories: limit orders and stop orders.
A limit order can be executed at the price at which you expect a reversal will take place. Limit orders are useful to prevent slippage. However, they carry the risk of not being filled at times of strong momentum in a certain trend.
The stop orders on the other side, are chosen to execute an order at a price that is expected to be broken. Unlike limit orders, they might be subjected to slippage in a fast-moving market.
See Also: The Dangers of Forex Broker Slippage
Besides the two general categories, sometimes traders use a stop-limit order. This one is quite different as it combines both stop and limit orders. A stop-limit order gives the trader more control over the prices of their trades. The trade will only be executed if the market prices fulfill the criteria set for the stop order and limit order. It is useful in situations like weekend gap, price gap, slippage, etc.
MT4 vs MT5 Pending Orders
Before choosing the winner, you need to know all the types of pending orders. There are 6 types of pending orders in MetaTrader platforms. Generally, MT4 provides the ability to order with buy stop, sell stop, buy limit, and sell limit orders. MT5 goes further by allowing traders to not only choose the 4 basic pending orders but also presenting them with buy stop limit and sell stop limit orders.
1. Buy Stop
Buy stop can be found in both MT4 and MT5. You can use this order when you expect the price to go higher and break through the buy stop level. When the price hits your buy stop level, your order turns into a market order and is executed. This type of entry is perfect if you are looking for a break above the previous candle or a key resistance level. For example, take a look at this GBP/USD chart. The trader who issues a buy stop order is waiting for the price to reach 1.31. So when the price touches the line, the order will be executed.
2. Sell Stop
A sell stop is the opposite of a buy stop. It's a type order to use when you are expecting the price to go lower and drop below certain key support. In this example, a trader places a sell stop order below 0.77. When the price moves past the intended target, the sell stop order will be executed.
3. Buy Limit
Buy limit is also available in MT4 and MT5. You use the buy limit when you expected the price to rise from key support below the current price. When the price hits the level you are intended, a buy limit order is executed.
4. Sell Limit
Sell limit is similar to buy limit, but it's the other way around. The price will be executed when the price reaches above the current level. In this case, the trader expects the price to reverse down after touching said level. In this case, a trader estimates the price to go lower after visiting the resistance level.
5. Buy Stop Limit
This one is quite different from the other four, as it is a combination of the previous orders. Also, the buy stop limit is only available in MT5, so you won't be able to use it if you are using MT4. This order is used by traders who want the benefits of a limit order, but also want the advantage of price moving in the expected direction.
When the price hit the buy stop limit level, the order became a buy limit order. But, the trade won't be executed unless the price is at the stop limit level or below. However, there is a risk of the order not being executed if the price gaps above the stop limit price.
6. Sell Stop Limit
A sell stop limit allows you to get in while the price is moving down. However, the trade won't be executed unless the price is at the stop limit price or above it. There is a risk of your order might not get executed if the price gaps down quickly. Similar to the buy stop limit order, sell stop limit can only be used in MT5.
Some Problems You Might Encounter
Although using pending orders ease your burden, that does not mean you won't have problems at all. Sometimes, your order might not be executed even though the price has hit your expected level.
There are several answers to that problem. The most common one is the spread might be very narrow. It's not wrong to use low spread trading, but when the price is unusually narrow, your price might miss your pending order by a fraction of pip.
Another reason is your chart will either graph the bid or ask price. Meaning, the bid on your chart might hit the pending order but the asked price needed to hit it in for the order to be triggered.
The volatility of the market may play a role too. When a market moves fast, the price might 'skip' over orders. This might happen when a computer system does not have enough time to execute an order, so the price just moves through it.
Sometimes, your order hit the price you intended in another broker, but not your broker. How can this happen? Well, you need to know that forex is a decentralized market. That means there is no central exchange that sets the quote for the pair you are trading with.
The price quotes among traders can be very similar because forex is a very efficient market. However, there might be a slight difference in the quotes from various brokers. This is because when there is a big difference in the price between liquidity providers, arbitragers come in and close that gap.
So Who Is the Better Platform?
So, which one is the winner of the competition between MT4 and MT5 pending orders? Answering these questions can be hard, but it all comes down to your strategy. If you only need the basic ones like stop orders and limit orders, using MT4 pending orders would be enough for you. But if you adopt a strategy that needs more flexibility in the way you set the pending orders, trying out MT5 can be a good choice. Either way, there's no denying that MT5 offers more types of pending orders than its predecessor. But some traders still prefer the MT4 for its familiarity and simple way of executing orders.
MetaTrader is a great system to help your trading activities, it's easy to use and multipurpose. Other reasons why you should use MetaTrader can be found here.