Why FX Trading Execution Matters?



There are several ways of trading foreign currencies, and being aware of the differences between the trade execution types is the key to enjoying better success in your trading venture. Each method has its own advantages and disadvantages and knowing the pros and cons of adopting each method will ensure that you stay informed as a successful investor and render you able to select the most appropriate execution option to fit your needs. The two main types of trading execution types are Instant Executions and Market Executions, and if you are choosing a top forex broker, you can be sure that you will have both types of trade available to you. Here we look at the differences between them and the benefits and drawbacks of each one.

What is Instant Execution?

When a trader opts to use the instant execution mode, their broker will attempt to execute their order by using the latest price which was displayed on their platform interface. As a consequence of this, there is a strong chance that the price may change during the time that the order is undergoing processing by the broker. Should the change in price be larger than any deviation parameter which has been specified in the order, the investor’s broker will offer a requote, which can either be accepted at the new price or rejected so that the order will no longer be executed.

The advantage of this execution type is that an order can be executed at a specific price that is known beforehand. An investor can see a price on their interface and send their buy order to their broker at that price, knowing that they will either open their position at their chosen price or will receive a requote to consider.

There is, of course, also a disadvantage to this execution type in that an investor may well miss an excellent trading opportunity during a time of high volatility if they are waiting for their broker to send them constant requotes.

What is Market Execution?

Many brokers use market execution to process investors’ orders and in this execution type, a trader’s order will be opened at the latest price that the broker is offering, whether it is the same or different to the one seen on the platform interface. Sometimes, there may only be a slight variation in the price, however sometimes there may be a larger difference.
The advantage of market execution is that currencies can be traded without the need for requotes, allowing for much faster execution of orders and 100% access to the financial markets.

On the downside, in a time of high volatility in prices, there can be a lot of deviation in prices and this can lead to making a loss on an investment. Also, another disadvantage is that the brokers which use market execution do not allow the setting of take profit and stop loss orders while opening the order. Orders must be placed bare first and then the stop loss and take profit orders must be applied once the price has been set.

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