Instant Execution Vs Market Execution

Category: Trading Guides | Author: Trading Brokers | Date: June 10, 2023

In the world of trading, the execution of orders plays a vital role in the success of a trade. Two common types of order execution methods are instant execution and market execution. Instant execution and market execution offer distinct features and advantages, which can significantly impact trade outcomes. By grasping the nuances of these execution methods, traders can effectively navigate the dynamic financial markets and enhance their trading experience. In this article, we will delve into the concepts of instant execution and market execution, explore their pros and cons, compare their characteristics, and ultimately assist traders in making informed choices regarding their preferred execution type.

What is Instant Execution?

Instant execution is a trading order execution method where a trader’s order is executed at the price displayed on the trading platform. The execution occurs instantaneously, without any delays or re-quotes. Traders have the advantage of entering the market at a specific price they desire.

In instant execution, traders set their desired price and submit an order through the trading platform. If the market conditions are favorable and the specified price is available, the order is executed immediately at the requested price. If the price is no longer available, the trader may receive a re-quote or choose to accept a different price.

Pros of Instant execution

  • Precise execution at the requested price, ensuring that the trade is executed as intended.
  • Control over the entry and exit levels, allowing traders to implement specific strategies.
  • Protection from slippage, as the trade is executed at the exact price set by the trader.

Cons  of Instant execution

  • Possibility of requotes if the requested price is not available in the market.
  • Limited flexibility in executing trades during periods of high market volatility.
  • Potential for order rejection if market conditions change rapidly.

What is Market Execution?

Market execution is a type of order execution in trading where the trade is executed at the prevailing market price at the time of execution. Unlike instant execution, where the trade is executed at a specified price set by the trader, market execution fills the order at the best available price in the market.

When a trader places an order using market execution, the order is sent to the market, and the trade is filled at the current market price. The execution process is instantaneous, and the trade is executed at the best available price in the market at that particular moment. Market execution is typically used in fast-paced markets, such as forex and stock trading.

Pros of Market execution

  • Execution at the prevailing market price, ensuring immediate entry into the trade.
  • No requotes or order rejections, as the trade is filled at the available market price.
  • Ability to execute trades quickly, particularly during periods of high market volatility.

Cons  of Market execution

  • Possibility of slippage, where the trade is executed at a different price than expected.
  • Lack of control over the exact execution price, which may result in minor variations.
  • Potential for wider spreads during volatile market conditions, leading to higher transaction costs.

Comparing Instant Execution and Market Execution

Differences in Execution Speed:

Instant execution provides immediate order execution at the requested price, ensuring rapid trade entry. It is ideal for traders who require precise and quick order placement. In contrast, market execution introduces a slight delay as orders are filled at the prevailing market price, which can be influenced by market conditions and liquidity. Market execution suits traders who prioritize execution reliability over speed.

Price Slippage and Requotes:

Instant execution may be subject to price slippage during volatile market conditions, resulting in executed prices that differ from the originally requested price. Additionally, requotes may occur if the market moves significantly between order placement and execution. Market execution eliminates the possibility of requotes but may involve slippage if there is insufficient liquidity or rapid price fluctuations. Traders need to weigh the trade-off between precision and potential slippage/requotes.

Control over Order Execution:

Instant execution grants traders precise control over the execution price, allowing them to enter and exit trades at specific levels. This level of control is particularly advantageous for scalpers or traders employing precise entry and exit strategies. Market execution, however, fills orders at the best available price in the market, reducing control over the execution price. Traders who value exact price execution may prefer instant execution, while those who prioritize quick and reliable order filling may opt for market execution.

Order Types and Flexibility:

Both instant execution and market execution support standard order types such as market orders, limit orders, and stop orders. However, instant execution platforms often offer more advanced order types, including pending orders and trailing stops, allowing for greater flexibility in implementing complex trading strategies. Traders seeking advanced order functionality may find instant execution platforms more suitable.

Market Conditions and Liquidity Impact:

Instant execution is less influenced by market conditions and liquidity as it executes orders at the specified price, regardless of market depth. This can be beneficial during volatile or illiquid market periods. Market execution, on the other hand, is more sensitive to market conditions and liquidity levels, as orders are filled at the best available price in the market. Traders should consider the potential for slippage and order execution during different market conditions when choosing an execution method.

Instant Execution or Market Execution?

Instant Execution is the preferred choice if you prioritize executing trades at the exact price you see on the trading platform. This type of execution is beneficial for traders who want to enter or exit positions quickly and have precise control over their trade entries. It allows for instant order execution without any re-quotes or slippage, ensuring that trades are executed at the desired price without delay.

On the other hand, Market Execution is more suitable if you value trade execution speed and are comfortable with accepting the current market price at the time of execution. With Market Execution, your orders are executed at the best available price in the market, which may differ slightly from the price you see on the platform.

Ultimately, the choice between Instant Execution and Market Execution depends on your specific trading goals, strategies, and preferences. If you require precise control over trade entries and want to ensure execution at the displayed price, Instant Execution is the way to go. However, if speed is of utmost importance and you are comfortable with executing trades at the prevailing market price, Market Execution provides faster order execution with potential slippage. Consider your trading style, risk tolerance, and desired level of control when deciding which execution method suits you best.

Conclusion

In summary, understanding the differences between instant execution and market execution is crucial for traders to make informed decisions in their trading activities. Instant execution offers immediate order execution, allowing for precise entry and exit points, but may be prone to price slippage and requotes. On the other hand, market execution provides execution at the best available market price but may have slightly slower order processing times. Considering individual needs and preferences is vital when choosing between the two execution types. Traders should weigh the pros and cons, evaluate their trading goals, and assess market conditions to select the most suitable execution type. By doing so, traders can enhance their trading experience and increase their chances of achieving their desired outcomes in the financial markets.


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