Why pending orders are such a useful method?
There are numerous benefits of using pending orders instead of market orders. If you are not using pending orders, perhaps this post could help you to reconsider your methods of order placement.
Makes trading a boring game (which it should be)
Pending orders will take the excitement out of the equation. As a result, it will help you reduce impulsive trading mistakes and more importantly save you from unnecessary losses.
Helps to improve the average R:R ratio of your trades
How can pending orders help with the R:R? I hear you ask. Well, the trick is to place the orders very close to the price where you would be wrong on the trade. Because you already know your stop lossand take profit levels (depending on your strategy), you just have to make sure that you place the order as close as possible to the stop loss. This means waiting for the price to come to your terms, instead of chasing it. In other words, you become a “crocodile,” waiting patiently, however long it takes for the prey to come along. With instant market orders, you are probably barking at the wrong tree more often than not. I know you are already in fear of missing good trades. Yes, you will lose a few good trades here and there. But if you find the sweet spot of R:R without losing many good trading opportunities, congratulations you have struck gold! Nonetheless, trading with the best possible R:R is more easier to implement with pending orders.
Give yourself the opportunity to correct any mistake, without losing money
Suppose you are trading on the Daily chart, with pending orders you would have ample time to monitor the price action even before the trade is triggered. If for example the market sentiment changes and the trade call is no longer valid, you have the opportunity to get rid of the trade without losing any money.
On the other hand, if you gather the trade call was a mistake after the trade is triggered, you only lose a small amount than what you would have lost with a market order.
Helps you make well-informed trading decisions
Working with pending orders helps you have a relaxed mindset when you do the analysis. Be it technical or fundamental, you won’t have the urgency to come up with a decision immediately. Because you would not be in a rush with entry orders, you have peace of mind to build into a trade, adjust order parameters, execute the trade or even withdraw from the trade. Since you will start planning for certain trades well ahead, you have plenty of time to make organized and informed trading decisions.
So if you are in the habit of executing market trades, it is time to rethink your order-placement strategy. Having said that, if you employ day trading on low timeframes, pending orders may not be the ideal approach. However, if your trading style is adaptable to include pending orders, perhaps you can give it a try. I also advise you to back-test and forward-test, or at least paper-trade to see how pending orders can make your strategy more profitable.