When placing trades on any trading platform, there are two execution types offered. This is usually preset for a given instrument and cannot be changed.
Let us learn about the execution types and their features.
Instant Execution is the method by which brokers execute orders at the trader’s requested price, or not at all. In other words, if the price of an instrument changes as you place an order, the broker will send you a notification (requote) to confirm you agree to the newly changed price.
Let us look at a simple example:
A trader wishes to place a buy order for EURUSD in a Pro account which offers instant execution. When he clicks Buy in the trading platform, the prices are 1.21701/1.21727. Since this is instant execution, the order will be opened at the exact price requested by the client or not at all. Thus, this buy order will be opened at the ask price 1.21727.
Now, let us consider a situation in which there is high market volatility and the prices quickly change from 1.21701/1.21727 to 1.21715/1.21738 once the trader clicks Buy. The trader will see a requote on the screen to confirm the newly changed price. This notification will last on the screen for 3 seconds; if accepted, the order will be executed at the new price. If the requote is rejected or no action is taken, the order is cancelled.
If you are facing requotes too frequently, you can customise a setting called deviation to let the system accept new prices within a set range. To find out more about deviation, refer to our article here.
Market Execution is the method by which traders execute orders at the current price within fractions of a second. The price can be either higher or lower than the one the trader sees in the terminal window as prices constantly change.
This execution type’s advantage is that it is the fastest available and presents the opportunity for 100% market access to traders.
Let us look at an example:
A trader wishes to place a buy order for EURUSDm in a Standard account which offers market execution. When he clicks Buy in the trading platform, the prices are 1.21705/1.21735 but they quickly change to 1.21719/1.21740. The system will automatically open the order at the new ask price of 1.21740 without asking for any confirmation. The price slipping to a different price is known as slippage and is a very common occurrence when using this kind of execution.
Comparison: Instant Execution vs Market Execution
One major difference between Market Execution and Instant Execution is that with the former, requotes don’t occur. However, especially during periods of market volatility, you do increase your risk as a strong fluctuation of the price in a short space of time is possible.
Let us look at a comparison table:
|Instant Execution||Market Execution|
|Requotes can occur.||No requotes.|
|Execution depends on the price availability.||An execution is assured.|
|Control over volatility & slippage||Higher risk associated with volatility & slippage.|