Instant vs Market Execution

Author: Patrick Dresdner
Patrick Dresdner
All publications of the author

Forex market is not just a marketplace for currency trading. In fact, here in Forex is not only its rules but also its own special definition of certain manipulations, operations and transactions. Today we introduce you to concepts such as Instant and Market Execution and tell you what they have in common and what the difference between them. Read the information in the section «STP Forex Brokers» in order to understand better the market and the concept of order processing.

Before explaining the difference between  Instant and Market Execution it is needed to become more familiar with what do these concepts mean.

Instant Execution literally sounds like "Instant execution". But not everything is so rosy, because Instant Execution operation actually does not guarantee instant execution of trading decrees. The fact is that the system does not apply to the execution of the trading orders. Because the speed of the operation is completely domain of Forex broker. And Instant Execution is just a principle through which you are entering the market. To be precise, if the broker has an obligation to execute the order in accordance with the system of Instant Execution then he is obliged to execute the order according to the price, which is present at the time you press the button Buy (the price is displayed in your chart is constantly and varies with fluctuations in the market) or simply ignore the order. If you want to get well-experienced representative of  Forex market, get acquainted with the information set out in section «How to choose a Forex Broker?».

To help you understand the process of this system, we consider it step by step:

  • At certain time, which you choose by yourself, you click on Buy, the price of which  you are satisfied at this moment.
  • The system gives you the broker's answer : "Order accepted" and "Order in the execution." This message is a sign for you know that the broker began working on your request and carries out an operation for the processing of your transaction in Forex. Most often, the query processing time is 20 seconds maximum. But in Forex 20 seconds is a lifetime. During this period the price could rise to several levels, drop down a few levels or remain stable. Given the fact that you gave the command to carry out the operation at the time when the price was 1.49059 for example, should be considered all the options which await you on the coming of 20 seconds.
  • The price went up. In this scenario, the broker if he is a professional, such as representatives of banks offering Forex trading, is not profitable to fulfill your order, so he loses on this one, because the market price is worse than you offered him. In this case, the broker simply gives you refuse to execute the operation because of  price change. He will notify you of this situation.
  • The price dropped. In this case, fulfilling your order at a specific price, the broker remains in profit, as he adds the difference in price to spread. But at the same time keep in mind, when the price suddenly goes too far against your orders, a good broker will most likely give you a failure in execution. Compare offers and choose a good executive broker, you can visit «Forex broker comparison» section.
  • The price remains the same. Broker completely fulfill an order and process order.

Like any other program Instant Execution has its advantages and disadvantages.

The advantages of its use lies in the fact that it is beneficial:

  • If your goal is to enter the market at the asking price or do not make any movement if the price does not suit you (it may be not only above but also below and in this situation your losses can be huge).
  • Only Instant Execution enables instant setting of parameters «TakeProfit» and «StopLoss».
  • Some scalpers (especially those who are accustomed to plunge into the unusual movements) can use Instant Execution system only in a strictly performance.

The disadvantage of this system is only one, but significant:

Requites - these are rejecting messages from the broker. The fact of heavy traffic can cause the market situation, when there are a lot of requites and there is a risk not to get into the market for the selected signal.

Now we move to the definition of «Market Execution». So «Market Execution» literally can be defined as the execution of the order on the market position or the market offer. As in the first case, this system has no relation to the speed of execution of the order. This system as well as Instant Execution is simply the principle on which your broker takes you to the market. The practice brings results, according to which the brokers  using Market Execution in work, perform the orders more often than those who work in Instant Execution system. This is due to the fact that they have more freedom, because they are not limited, because they work with market price. Market Execution system apply ECN Forex brokers in their work through the ECN trading system.

So, Market Execution system is constructed in such a way that the broker, who uses it, can guarantee you almost complete fulfillment of all orders. The only catch is that not always the performance price will be the same as you specified. The fact is that the broker is working on a system Market Execution, obliged to fulfill the order at the price, which will be actual in the market at a time when you press a button. Just do not forget about the 20 second interval, which is set aside to process of the request and do not forget about the price movements in the market, which for 20 seconds can act in three different ways: to increase, decrease or remain unchanged.

Thus, for example, this would work as follows:

  • At a certain time you press Buy, seeing in you chart price, which is the most suitable for you.
  • Broker provides the answer: "The order is accepted" and "Order in the performance." This message is a sign that the broker began working on your request and carries out an operation for the processing of your transaction in Forex. But remember that most of the query processing time is 20 seconds maximum. This means that you need to consider what you will get as a result of movements in the market, which will take place during this period of time.
  • The price remains the same - you will get the processing for the price that you clicked.
  • The price decreased - you will get the income for the number of points, it depends on how much the price went down.
  • The price went up - in processing you will get worse price in a number of points as it has changed at that time in the market.

 In any case, a broker will fulfill your order, but you will find yourself at the same time in the black or the red or get the expected result, it is entirely dependent on the destiny and good luck.

Advantagess of Market Execution system use will be beneficial for you if:

  • Your goal is not the market price, but the entry into the market, i.e. the execution of the warrant.
  • This system will enable Forex brokerage companies to process requests with greater speed, display them on the Forex and thus earn income to the client.
  • If a system with a mathematical miscalculation it is not a sense of nuance appearing in the market, but only the fact of participation is important.

In contrast to the first system in Market Execution there are several disadvantages, namely:

  • Its feature of conduct the transaction at that time price inside the market.
  • Failure to set limits, set TakeProfit and StopLoss at the time of sending the order to the broker for processing. Here the point is that it is impossible to predict the price at the time of execution of the order and this can increase risk in your trades
  • There may be serious difficulties in order to set the order manually, since there is no way to send it with the markings parameters «TakeProfit» and «StopLoss».

In order to determine what kind of trading strategy will be beneficial to you, analyze all the advantages and all the risks which are waiting for you when using a particular program.

 

Below are these two market orders explained in more detail using an illustration:

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