4 Steps For Trade Execution

4 steps to execute your trade

Trade execution, the pivotal moment in the trading cycle, is the process of placing a trade and having it filled at the desired price. It is a critical aspect of trading, directly impacting your profits or losses. This process typically involves the following four steps:

• Choose a broker

• Send an order to your broker

• Routing the order

• Filling the order

Choose a broker

The initial and crucial step in the trade execution process involves meticulously selecting a broker. Brokers are essential intermediaries, facilitating seamless asset transactions for traders in complex financial markets.

When making this pivotal decision, it is imperative to delve into various factors that can impact the overall trading experience. You should thoroughly evaluate the broker's reputation within the industry, the structure of their fees, the diversity of available trading instruments, and the overall quality of their trading platform.

A trustworthy broker ensures the security of financial transactions and contributes significantly to the efficiency and effectiveness of the entire trading process. To help you avoid making rookie mistakes when choosing a broker, we have written a guide: How to choose a Forex broker wisely

Send an order to your broker

After the careful selection of a broker, the trader engages in the process of sending a detailed trading order. This order serves as a comprehensive set of instructions, intricately outlining the specifics of the intended trade, including:

• the type of asset to be traded,

• the desired quantity,

• and the targeted execution price.

It is vital to distinguish between various order types, such as market orders executed promptly at the prevailing market price and limit orders fulfilled at a specified price or better.

Routing the order

The next phase involves the intricate routing process with the trading order duly submitted to the selected broker. Routing is the mechanism by which the order is directed to the relevant market or exchange where the specific asset is actively traded.

Brokers employ many methods and strategies to ensure optimal execution of the order. The primary objective during routing is to secure the best possible execution for the trader, considering market liquidity and the speed at which orders can be fulfilled. This stage demands a nuanced understanding of market dynamics and the ability to navigate the complexities of different trading environments.

Filling the order

Once the order has been successfully routed to the designated market or exchange, it is executed at the best available price. This could be the pre-specified price or a more favorable one for limit orders.

In contrast, market orders are fulfilled at the prevailing market price. The efficiency and accuracy of order filling are paramount, as any deviation from the expected execution price can result in slippage. Slippage, the difference between the anticipated and actual execution prices, underscores the critical nature of this phase in determining the overall success of the trade.

Comprehensive understanding and adept navigation of these meticulously detailed steps are indispensable for traders. The intricacies of trade execution wield a substantial impact on investment outcomes, ultimately delineating the boundary between profit and loss in the dynamic realm of financial markets.

Best Forex brokers

1

9.4/10

Go to broker

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest.

Minimum deposit:

$50, $100 (for UK clients)

Bonus for deposit:

0%

Regulation:

CySEC, FCA, ASIC

Review

The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC (109/10) and eToro (UK) is licensed by the British regulator FCA (583263). The broker also has a representative office in Australia and the USA. eToro Profile Details

Pros/Cons

•the minimum transaction amount for copying is $1;

•handy functionality for passive investing;

•regulated by independent monitors;

•it is possible to purchase contracts for fractional shares (that is, to invest amounts less than the cost of one share);

•it is possible to buy shares at once (not CFDs) on the US stock exchanges.

•high spreads;

•periodic technical failures in order execution;

•lack of the most popular platforms such as MetaTrader 4 and MetaTrader 5 in Europe and the CIS;

•no access to ECN systems, orders are processed only according to the STP (straight-through processing) scheme with access to specific liquidity providers;

•there is a commission for withdrawing funds;

•impolite support staff;

•inconvenient website.

Study Review

2

9.2/10

Go to broker

Your capital is at risk.

Minimum deposit:

No minimum

Bonus for deposit:

0%

Regulation:

FSC (BVI), ASIC, IIROC, FCA, CFTC, NFA

Review

The name OANDA is an acronym for “Olsen & Associates” or “Olsen AND Associates”. It is registered in the United States and provides its clients with a wide range of financial services in most countries of the world. The company was founded in 1996 and is currently regulated in four jurisdictions. The main regulator of the broker is the UK Financial Conduct Authority (FCA). Oanda Canada is licensed by IIROC. The company has several significant awards to its credit, including a victory in the category "Best Forex Trading Technologies" from the UK Forex Awards, "Best Trading Platform" from FX Week, as well as "Best Customer Service" from the US Foreign Exchange Report.

Pros/Cons

•Minimum deposit from 1 dollar.

•A large selection of the most popular trading instruments.

•Several reliable and reputable financial regulators.

•Inconvenient and poorly functioning site.

•Lack of cent accounts.

•Lack of bonus programs.

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Types of trade execution methods

• Market Orders: Market orders are fundamental trade orders executed promptly at the best available market price. Emphasizing speed, their primary objective is immediate transaction, prioritizing quick execution over waiting for a specific price. Ideal for traders valuing swift execution without precise control of the transaction price.

• Limit Orders: In contrast, limit orders provide control over the execution price. Traders specify the maximum price for a buy order or the minimum for a sell order. Limit orders are executed at a specified or better price, offering precision in setting entry or exit points. However, they aren't guaranteed to fill, contingent on the market reaching the specified price. Execution depends on market conditions meeting the criteria set in the limit order.

• Stop orders are executed when the market price reaches a specified level. They can be used to limit losses or lock in profits.

The peculiarities of different types of orders are described in detail in the article: Market, Limit, Stop And Other Order Types Traders Should Know