Instant and Market Execution
In the Forex market, orders are categorized by execution type as instant execution or market execution. The execution type is chosen by the trader when opening an account and cannot be changed afterward.Instant Execution
With instant execution, the trader must first specify the volume and price at which they want to open a trade. Unlike market execution—where an order is executed even if the requested price is no longer available, resulting in slippage at the next available price—here the broker can reject the order and issue a requote.In some cases, requotes create additional challenges for trading. They give the broker flexibility, which can potentially be used to manipulate orders. Rapid price fluctuations can lead to frequent requotes, delaying the execution of trades. This makes trading on short timeframes particularly difficult.
The speed of execution depends entirely on the broker’s conditions. Instant execution is essentially a mechanism that allows the trader to enter the market.
Additionally, instant execution is often paired with a fixed spread, which is typically wider than the actual market spread.
Market Execution
Market execution involves executing an order at the current market price. Like instant execution, it is essentially a mechanism through which the broker allows the trader to enter the market. The main difference is that there are no restrictions—the order is executed regardless of price changes.Market execution is designed so that the broker guarantees the trader’s order will be filled. The only drawback is that the execution price may not always match the requested price. This is because the broker is not obliged to execute the order at the price that was current when the trader submitted the request. Order processing takes some time, and quotes can change during that period.
On the one hand, market execution allows trading without requotes, as the broker provides a 100% probability of order execution. On the other hand, slippage is possible, and it can be significant when trading volatile currency pairs.
For example, if the EUR/USD pair is trading at an Ask price of 1.07610 and we decide to place a buy order with market execution, the order could be filled at 1.07700 by the time it is processed (a price deviation of 9 points). This is significantly higher than the initially intended price.
Comparison of Instant and Market Execution
Instant Execution
- The order is executed without slippage.
- The trader can reject the execution if the price at the time of order opening differs from the requested price.
- On volatile markets, it may be difficult to open a trade due to requotes.
- Wide spreads (usually fixed).
Market Execution
- No requotes.
- The order is executed in any case, even if the trade’s opening price differs from the initially requested price.
- On volatile markets, significant slippage is possible.
- Tight spreads (mostly floating).
Conclusion
From the above, a simple conclusion can be drawn: there is no such thing as the "best" type of execution. The trader must clearly define their goals and trading strategy before choosing an order execution type. In general, market execution appears to be more equitable, while instant execution is safer.If the priority is guaranteed order execution for currency pairs with low volatility (low risk of slippage), market execution is ideal. If precise execution price is crucial, instant execution is the more suitable choice.
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