Instant execution vs market execution

You have surely noticed that sometimes an order is not executed at the precise asking price. Is the broker cheating? Or a platform bug? Fortunately, neither one is the case. It's simply the nature of the foreign exchange market, where prices can change faster than the speed at which orders are filled. There are two ways that orders are executed: instant execution and market execution.

 

Market execution

With market execution, an order is filled at the next available price, the trader just needs to specify the volume. The bid/ask price of an asset is generated during the execution process. With some brokers, Stop Loss and Take Profit levels can only be added after the trade has been opened, when the price is known.

MT4 - market execution

The main difference from instant execution is that the broker cannot guarantee the filling of the order at the exact price, but he will not reject the trader's request (re-quotation) in the event that price changes, the broker will execute the order at the next available price. The final price is calculated according to the requested volume and the prices available on the DOM - Depth Of Market. The difference between the asking price and the filled price is called "slippage".

All of the major liquidity providers (LPs), as well as the majority of A-book brokers (STP/ECN), work according to this principle, but market execution can also be used by B-Book brokers (Markets makers).

 

Instant execution

With instant execution, the trader must specify the volume and price he wants; the order is then filled at the desired price if it is available on the server side. Unlike market execution, which fills an order at the next available price with or without slippage, if the asking price is no longer available, the broker can reject the execution of the order and respond with a requote. The trader then has the choice to accept the new price or not. To avoid the re-quotation message, he can define a maximum difference between the asking price and the price obtained.

Prices in instant execution are predefined, which allows you to set stop loss and take profit levels before opening a trade. This method of execution is only used by market makers who do not link their clients' orders directly to the liquidity providers.

Instant execution is often supplemented by a spread that is fixed and wider than the real market spread.

MT4 instant execution

A broker that uses instant execution may have some difficulty placing trades with the large liquidity providers (LPs), as almost all LPs use the market execution model. An LP that uses a market execution cannot guarantee an execution price, whereas the broker is obliged to guarantee one to its customers.

Some buy and sell prices are only available for specific volumes in the market, so large orders can only be executed according to volumes available on the order book. If there is not enough volume for the asking price, the orders are not filled, which increases the number of re-quotes for the broker's clients and affects the execution quality.

However, nothing prevents brokers from using non-DOM market execution by calculating prices with their proprietary algorithms.

 

Conclusion

Market executionInstant execution
Order filled at the next available price Order filled within the maximum allowed slippage
Automatic execution even if the price differs from the asking price The trader can refuse execution if the price is different from the asking price
May be subject to slippage May be subject to requotes
Tight spreadsSpreads are typically fixed and wider
Doesn't allow predefined stop loss and take profit levels Allows predefined stop loss and take profit levels
Used by all types of brokers Used by market maker brokers

 

Each type of execution has its own advantages and disadvantages. The choice of execution must be made according to your trading style and strategy. In our opinion, market execution is more fair while instant execution is safer. If you place priority on the odds of completing an order and are trading over longer time periods that are less affected by slippage, then market execution is ideal. But if the exact fill price is vital for your strategy and you trade over shorter time periods, instant execution may be more appropriate.

  Type of brokerMarket execution Instant executionOpen an account
AvaTradeMarket MakerYesNo open a demo account
easyMarketsMarket MakerYesNoopen a demo account
ETX Capital Market MakerYesNoopen a demo account
Forex4YouSTP / MTFYesYesopen a demo account
FxOpenSTP / MTFYesYesopen a demo account
GKFX Market MakerYesNoopen a demo account
HYCM Market MakerYesNo 
JFD BrokersSTP / MTFYesNoopen a demo account
LiteForex STPYesNoopen a demo account
Pepperstone STPYesYesopen a demo account
Plus500 Market Maker YesNoopen a demo account
TrioMarketsSTPYesNoopen a demo account
XMMarket MakerYesNoopen a demo account
XTBMarket MakerYesYesopen a demo account

 

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