Recently, many of my students in the VIP signals channel have asked me a similar question.
“Dylan, why do you prefer to place pending limit order trades?”
Before answering the question, let me give you a little more context.
In the VIP signals group, the students receive daily real-time notifications every time I see a new opportunity in the market.
The majority of these signals are sent as “pending limit orders” , meaning the buy or sell signal is pending activation at a specific price level. Once price reaches the predefined level, the buy or sell order will be triggered.
Here are 3 reasons as to why I prefer to use pending limit orders over any other type of orders:
1. Limit orders are perfect for my style of trading.
In my style of trading, I target the lows or highs and expect a stop hunt or induction past a specific price level. The use of pending limit orders allows me to enter into buy or sell positions at optimal price levels.
2. Limit orders allow more traders that are taking our signals the opportunity to enter into the trade.
Since limit orders are pending orders that take time to be activated, this gives more traders time to enter the pending orders into their trading accounts. Limit orders also ensure that most traders taking our signals get the best possible entry price.
3. Limit orders allow me to trade while I am sleeping.
Finally, I have saved the best for last. Pending limit orders have allowed me to successfully trade while I sleep.
I love trading London session. However, for me London session starts after midnight. In order to be able to sleep and wake up for New York session I will set pending limit orders in zones of liquidity where I expect a reversal in price.
I analyze the market a few hours before London session before I go to bed. If I see any potential setups that may play out for London session, I will set my Pending Limit Orders and then go to sleep.
Tip for trading using pending limit orders:
A rule of thumb for trading with limit orders is to trade with smaller risk and a larger stop loss. This allows you to be able to sleep without having nightmares and also gives price a little more wiggle room for the stop hunting and induction which always occurs before the reversal.