Disadvantages of trading using pending orders

Pending orders are a popular tool among most traders today; they save time and allow you to open trades without having to sit in front of your trading platform.

We almost always hear about the advantages of pending orders, but no one mentions their disadvantages.

Despite their ease of use, pending orders also have some disadvantages that affect trading efficiency.

There aren't many of them, but they do exist, so it's a good idea to consider these specifics of trading with pending orders when planning new trades.

Here are the main disadvantages of pending orders

Failure to trigger – the price may never reach the target level. This will result in a loss of time during which profit could have been made:

It often happens that the price is just a couple of points short of the target value, and if you had been monitoring the situation yourself, you would have most likely opened the position manually.

Opening at an outdated price – the market situation may change, and the set price will no longer be relevant. For example, if you placed a buy limit , it should trigger at the lower boundary of the price channel.

But instead of a rebound from the support line , it was broken, and you opened a buy order, and the price continued to fall, increasing the loss.

Opening at the wrong time – this could be a weekend or holiday. If an order is opened on Friday, it will be charged a triple swap . And if a gap occurs over the weekend, the order could close on Monday with a loss greater than your stop-loss.

However, this drawback can be eliminated by limiting the pending order's lifespan using the "Expiration" parameter. In this case, you can limit the order's lifespan to Thursday.

Placement restrictions – some brokers impose restrictions that require the price in a pending order to be a certain distance from the market price, otherwise you will not be able to open a position.

As a rule, this is 40-60 points, in some cases even such a small distance plays a role.

Despite the above-mentioned shortcomings, pending orders still remain one of the most popular tools on a trader's trading platform.