You are about to open an account with a forex broker and you have to choose what execution type you prefer, Market or Instant? The truth is that they are both fundamentally different and both have their own advantages and shortcomings.
A long time ago when I had just started trading forex, I wanted to trade the first Friday of the month. I thought it would be an educating experience to trade the news and as soon as the Non-Farm payrolls report was released, I picked my price and went for the market. Unfortunately, the platform never let me execute the order. Try as I might, I was given a requote every time. Trying to find a solution to this problem, I decided to change my execution type from instant to market. The following first Friday of the month I was once more getting ready to trade the NFP. At the time of the announcement, I managed to enter my order successfully but this time, I got a slippage of 22 pips. This is what made me realize that both execution types can have their drawbacks and deciding which of the two to go with is simply a matter of preference, but you should always take into account which one fits your trading strategy best.
An Instant execution order is executed at the price you requested if the price is still available, otherwise you get a requote. By choosing Market execution, you are guaranteed to get the best price available in the market. However, the price oftentimes may differ from the one you requested and this can work either in your favor or against you.
Moreover, there are many differences between the two, such as a different offering of spreads and commissions. Most brokers offer market execution with commissions but lower spreads. FXTM offers instant execution on Standard accounts and Market execution on ECN accounts with competitive spreads and low commissions.
If you are at the crossroads of which type is more appropriate for you, the answer can be gathered from what you are trying to accomplish with your trading strategy. If, for example, you have an Expert Advisor that is highly active on the market and trades over two times per day, the spreads matter, so going for the Market execution would be more suitable to your strategy. Frankly speaking, most of the highly active Expert Advisors work on Market execution to take advantage of the lower spreads. Statistically, the profitability of Market execution with EAs is greater than Instant execution orders. On the other hand, if you have a strategy that makes only a couple of trades per week, you could consider going with Instant execution and focus on the price instead of the spread since you will not be paying any commissions either.
One disadvantage of Market execution that you must consider is that when you open a market position you cannot set up a stop loss and take profit limit at the moment you enter the market. This can be unfavorable if the price suddenly moves against you. Also if you have an EA on Market execution, you will notice that it first opens the trade and then modifies the position, which can be problematic with certain trading strategies and especially with scalping.
When you are opening an account, you should take into consideration which type of execution is more suitable for your strategy. Both execution types have their advantages and it is highly recommended that you take the time to find out in which case, one is more beneficial than the other, in order to decide which is more appropriate for your trading style.
Written By Yiannis Georgiou, Head of Reception and Execution Departments, at Forex Time Limited
Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime Ltd, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
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NOTES TO EDITORS
The FXTM brand name was founded by Andrey Dashin in December 2012. FXTM provides access to the global currency market and offers trading in forex, precious metals, Share CFDs, ETF CFDs and CFDs on Commodity Futures. Trading is available via MT4 and MT5 platforms with spreads starting from just 0.5 on the Standard MT4 trading platform and from 0.1 on the ECN.MT4 and ECN.MT5 trading platforms. Bespoke trading support and services are provided based on each client’s needs and ambitions - from novices, to experienced traders and institutional investors. ForexTime Limited is regulated by the Cyprus Securities and Exchange Commission (CySEC), with licence number 185/12 and FT Global limited is regulated by the International Financial Services Commission (IFSC) with licence numbers IFSC/60/345/TS/14 and IFSC/60/345/APM/14.
