Specifics of the execution of Instant Execution and Market Execution orders in FOREX trading

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Today, brokerage companies offer various trading accounts that use one or another method of order execution. Despite the fact that the preponderance of preferences has lately leaned towards Market Execution, companies providing services on the FOREX market are in no hurry to exclude the second of the execution options from the assortment.

Instant Execution

This type of execution is more often used by newcomers to cent accounts, for whom the accuracy of execution is important at the expense of speed, and sometimes even the ability to conclude a deal at all. For example, it can be pipsing or short-term scalping , where it is very important to open a position at a specific price. The logic of a currency speculator who prefers Instant Execution can be described as follows: it is better to let the deal not be concluded at all than to open on the market at the wrong price, which I wanted.

instant execution or market execution

The literal translation of the term Instant Execution is instant execution or instant execution. Despite the fact that many brokers flaunt this translation and claim that execution of trade orders with Instant Execution is really instantaneous, in fact it is not so. The execution system has nothing to do with the speed of execution of a trade order. The speed is entirely determined by the broker, his dealing policy and honesty, and the execution system is the principle by which you are brought to the market.

More precisely, the term Instant Execution can be translated as exact execution. Those. the Forex broker, executing your order using the Instant Execution system, undertakes to execute it either at the price at which you sent the request (i.e. at the price that was displayed on your chart at the time of pressing the Buy or Sell button), or not perform at all. Let’s consider in more detail the mechanics of the process using an example:

You press the Buy button which says EUR / USD 1.49059.

The broker will give you a message Order is accepted and the Order is executed. This means that the broker has started processing your request and is trying to transfer your deal to the interbank (forex). This process takes some time, usually from 0.5 to 20 seconds. During this time, the price can go up, down, or stay in place.

Let’s take a closer look at each of these options, taking into account the fact that according to the Instant Execution rules, the broker is obliged to bring you to the market at a price of 1.49059 or not at all.

The price has not changed. In this case, your order will be executed at the requested price 1.49059.

The price went down. Those. if the broker executes your order at 1.49059, it will be able to earn this price difference in addition to the spread, since it will be able to buy cheaper than you ask. In this case, your order will be executed at the requested price 1.49059. It should be noted that if the price moves too far against you, then most likely the broker will not execute your order.

The price went up. In this case, it is not profitable for the broker to execute your order, since the market price is worse than yours. In this case, your order will be rejected by the broker, and you will receive a message that the price has changed – the so-called requite.

When executing pending orders and orders like TakeProfit and StopLoss, the Instant Execution system also has its own nuances, and they are so diverse that there is no point in describing them all. We only note that in the case of strong price gaps , i.e. when the price jumped over your order or stop order, they may be executed with slippage , may not be executed, may be executed at the requested price, it all depends on the broker.

Instant Execution Benefits

If it is important for your strategy to enter accurately, i.e. exactly at the price that is requested, and if it doesn’t work, then it’s better not to enter at all, then you must select “Instant Execution”.

With “Instant Execution”, it is possible to set the “TakeProfit” and “StopLoss” parameters immediately when sending an order. 

For a number of scalpers (especially those that jump into abnormal movements, for example, on the news), only the “Instant Execution” execution system is suitable, i.e. for them, execution not at the stated price can change the mathematical expectation of the system in the negative direction.  

Disadvantages of Instant Execution

The main drawback of Instant Execution is requites . If the market moves too fast, then the number of requotes rises sharply and there is a chance not to enter at all by your signal. On average, the number of requites ranges from 1% to 20% of the total number of orders. There are practically none of them in a calm market; there are more than enough of them on the news. For example, some systems are insensitive to the fact that a trade will be opened slightly worse or better than the requested price. It is much more important that it be open at all, because such systems are built on a series of transactions, and the break of a series can disrupt the entire system.

Market Execution

Market Execution is perfect for those traders who need to open a position, no matter what. In an active market, this type of processing of trader’s orders will be preferable, since requotes that offer a new price to conclude a deal are excluded.

The literal translation of the term “Market Execution” is market execution or market execution. As in the case of “Instant Execution”, this system does not in any way determine the speed with which your requests will be processed – this is the principle by which you are brought to the market. In practice, though, brokers using Market Execution execute orders faster than brokers using Instant Execution.  

If a broker uses this order execution system, then he guarantees you, with almost 100% probability that your order will be executed, but it is quite possible, although not necessary, it will be executed not at the price you see on the screen, but according to the one that will exist on the market at the time the order is executed. This price can be either better or worse than what you saw on the chart when you clicked the Buy or Sell button.

Let’s consider in more detail the mechanics of the process using an example:  

You press the “Buy” button which says GBP / USD 1.65282.

The broker will give you the message “Order accepted” and “Order in progress”. As with “Instant Execution”, this means that the broker has started processing your request and is trying to withdraw your trade to the interbank market (forex). While he is doing this, the price can go up, down, or stay in place.

The price has not changed. In this case, your order will be executed at the price of 1.65282.

The price went down and amounts to 1.65202. In this case, your order will be executed at 1.65202 and your order will be opened 8 pips better than you planned.

The price went up and now amounts to 1.65361. In this case, your order will be executed at 1.65361 and your order will be opened 7.9 pips worse than you planned.  

As you can see from the example, your order will be executed in any case, no matter how the price behaves, but worse or better than the price you see – it entirely depends on chance.  

Market Execution Benefits

If for your strategy it is not the accuracy of the entry that is important, but its very fact, then it is better to choose a broker with the “Market Execution” execution system.

The very logic of this execution system allows the broker to process client requests faster and bring them to the market.

For systems with a mathematical expectation and a large “spread”, the nuances of entry do not matter, and if it is not the accuracy of the entry that is important for them, but its very fact, then it is better to choose a broker with the “Market Execution” execution system.

Disadvantages of Market Execution

The main drawback of “Market Execution” is its advantage, namely, execution at the price that exists on the market at the time of execution. During periods of abnormal volatility, i.e. at the moments of important news releases, market openings after the holidays, etc., the price can change in leaps and bounds by tens of points. During such periods, your orders can be opened both with a big plus for you, and vice versa with a big loss.

When working with this system, it is impossible to specify the “TakeProfit” and “StopLoss” parameters immediately when sending the order to the broker. Because It is not known in advance at what price the order will be executed, it is impossible to determine whether “TakeProfit” and “StopLoss” will be outside the boundaries of the permissible Stop / Limit levels or not. Those. first you must open an order, and only after that set “TakeProfit” and “StopLoss” by modifying it.

Some systems are insensitive to the fact that a trade will be opened slightly worse or better than the requested price. It is much more important that it be open at all, because such systems are built on a series of transactions, and the break of a series can disrupt the entire system. The inability to send an order with preset levels “TakeProfit” and “StopLoss” slows down the process of manual order placement.

Since most experienced traders lean towards Market Execution, companies either specialize in this method of processing client orders or offer trading accounts with both execution options. It should be noted here that all ECN accounts use only Market Execution.

As a rule, Instant Execution is used on entry-level accounts, for example, Cent, Standard, and so on. Another distinctive feature of the methods for processing client orders is the use of various principles for calculating spread. If Instant Execution differs by fixed spread values, then Market Execution, on the contrary, occurs on deposits with floating spread values.

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