Do You Know How To Choose Your Execution Type?

Do You Know How To Choose Your Execution Type?

In a previous blog post we covered the eight different types of pending orders that can be carried out using the MT5 and MT4 trading terminals.

When trading it is important to consider both the order type that you want to make use of, and the execution type that you think will work best for you.

Execution is fundamentally the method through which your order is carried out.

There are two types of execution that traders can use with Exness: instant execution and market execution.

Let’s go through these in turn.

Instant Execution

Instant execution is when you want your order to be executed at a specific, defined price. Let’s use an example. Say that 1.3900 is the price that you want to buy GBPUSD at. You either wait for the market to hit that price, or you set a pending order to buy when that price is reached.

The order is triggered, from Exness to the server, then back via Exness through to your account. In an ideal world you will have bought your desired number of lots at the 1.3900 price.

Unfortunately, we don’t live in an ideal world. Sometimes, by the time the order reaches the server, the price has already changed. This will trigger one of two events, depending on whether you’re trading with market order or pending order.

With market order you will receive a “requote”, a pop-up in your terminal which will ask whether you’re happy to go ahead at the new price. You’ll then have three seconds to decide whether to go ahead with the order, or cancel it.

The frequency of requotes can be controlled by setting a “deviation” (the range within which you’re happy for an order to be placed), and by ensuring you have a fast internet connection.

With instant execution, pending order, you could run into something called “gap level regulation”. This is the formula by which we decide whether your pending order will execute at your defined price, or at the new market price.

Instant execution is typical for Exness market maker accounts.

Market Execution

Market execution is the other available execution type for Exness traders. Whereas with instant execution the trader is looking to get into the market at a specific price, market execution instead means that the order will be placed at the best possible market price.

The impact of this is clear. Whereas with instant execution you’re not guaranteed to get into the market at first try, with market execution your order will definitely be placed, just not necessarily at the price you wanted.

If there is any price change this is referred to as slippage. We typically see more slippage during times of market volatility.

Let’s see this in an example. You set a pending order to buy EURUSD at 1.2300. The price reaches that level and the order starts to be executed. Fortunately for you, the price has moved to 1.2298 due to volatility, which as best market price will still be executed. You would end up buying at a better price in this execution due to slippage.

Slippage works both ways though, and you could just as easily have bought at a worse price if there was slippage to 1.2302.

Market execution is the default execution type for ECN accounts. Traders using market maker accounts can also take advantage of market execution too, they simply need to pick currency pairs with the suffix “-k” from their terminal. To find out more about execution types for each account, check the website here.

Conclusion

Having to juggle execution and order types can seem complex, however once you get started you’ll quickly discover what works best for you and your strategy.

Open an account today and start testing out execution types yourself!

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